sarojkjha Unit Economics & LTV:CAC
Establish whether a business can profitably acquire customers — the foundation under every budget and growth decision. Get LTV, LTV:CAC, and CAC payback, then judge them against healthy ranges. This is usually the first thing to run before any paid-media or budget work.
When to use
The user needs to compute or validate unit economics, set a CAC ceiling, or answer "can we afford to spend more?"
Before you start
- Read the brand/product context first (
.agents/product-marketing.md/.agents/aaj-brand.md) for model and pricing, if present. - Gather inputs for the model:
- Subscription: monthly revenue per account (ARPA), gross margin %, monthly churn % (or average lifetime in months), and CAC.
- Ecommerce: average order value, gross margin %, orders per year, retention in years, and CAC.
- Services / contract: average contract value, gross margin %, retention in years, and CAC.
- If CAC isn't known, supply ad spend and customers acquired to derive blended CAC.
The math
Subscription: LTV = (ARPA_monthly × grossMargin%) ÷ monthlyChurn%
CAC payback (months) = CAC ÷ (ARPA_monthly × grossMargin%)
Ecommerce: LTV = AOV × grossMargin% × ordersPerYear × retentionYears
Services: LTV = ACV × grossMargin% × retentionYears
Everywhere: LTV:CAC = LTV ÷ CAC
Always use gross-margin LTV (revenue × margin), not revenue LTV — revenue you don't keep can't pay back acquisition.
Run the engine
Paths assume you installed with
npx skills add. From a clone of this repo, useskills/unit-economics/resources/…instead.
node .agents/skills/unit-economics/resources/unit-economics.js # demo (subscription)
node .agents/skills/unit-economics/resources/unit-economics.js '{"model":"ecommerce","aov":80,"grossMargin":60,"ordersPerYear":3,"retentionYears":2,"cac":40}'
node .agents/skills/unit-economics/resources/unit-economics.js --help
It prints LTV, LTV:CAC, payback, and a verdict, plus a JSON block.
Interpret the result
- LTV:CAC ≥ 3:1 is the healthy floor. Below 3:1, acquisition is inefficient — fix economics before scaling spend. At 5:1+ you may be under-investing — if demand exists, you can likely spend more to grow faster.
- CAC payback: under ~12 months is the common B2B guideline; under ~6 months for ecommerce. Longer payback ties up cash — watch burn.
- The biggest LTV levers are usually retention/churn and margin, not ARPA. A small churn improvement compounds through LTV.
Present the result
Lead with the three numbers (LTV, LTV:CAC, payback), then the verdict, then the one or two highest-leverage fixes. State that LTV is gross-margin based.
Guardrails & common mistakes
- Use gross-margin LTV, never revenue LTV.
- Be honest about churn. Early-stage churn estimates are often optimistic; if unsure, model a range.
- Blended vs paid CAC. Blended CAC (all new customers ÷ all S&M) flatters paid efficiency; for channel decisions use paid CAC. Say which you used.
- Don't over-trust a single ratio. A healthy LTV:CAC with 24-month payback can still strain a cash-tight business.
Related AAJ resources
- Interactive tool: https://aajconsult.com/tools/unit-economics-calculator
Related skills
paid-media-budget-allocation (uses the CAC ceiling this produces) · marketing-budget-planning · lifecycle-and-retention (the biggest LTV lever).
Credits
Original AAJ skill. The Agent Skills format and the marketing-skills catalog by Corey Haines (coreyhaines31/marketingskills, MIT) were references for structure and coverage; this skill is independently written. See the repository README for the full reference list.