Unit Economics Calculator
Analyze your per-customer profitability by combining ARPU, CAC, gross margin, and customer lifespan. See your LTV:CAC ratio and understand whether each customer is profitable.
Average revenue per user per month
Customer acquisition cost
Revenue minus cost of goods sold
Average customer lifetime
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Understanding Unit Economics
Unit economics is the foundation of every sustainable business model. It strips away the complexity of financial statements and asks a simple question: is each customer worth more than they cost? If the answer is yes, you have a viable business that improves with scale. If no, growth only accelerates losses.
The Core Equation
Unit economics boils down to LTV vs CAC. LTV (Lifetime Value) is how much gross profit a customer generates over their lifetime. CAC (Customer Acquisition Cost) is what you spend to get them. The ratio between these two numbers determines your business viability. A 3:1 ratio means every $1 of acquisition spend generates $3 of gross profit.
CAC Payback Period
Even with strong LTV:CAC ratios, payback period matters. If it takes 24 months to recoup CAC, you need significant working capital to fund growth. Shorter payback (under 12 months) means you can reinvest profits faster and grow more efficiently. This is why investors care about both the ratio and the speed.
Improving Unit Economics
The four levers are: increase ARPU (upsells, pricing power), decrease CAC (better targeting, organic growth), improve margins (reduce COGS, automate), and increase lifespan (reduce churn, improve product). The highest-impact lever varies by business stage and model.
Frequently Asked Questions
- What are unit economics?
- Unit economics is the analysis of revenue and costs on a per-customer (or per-unit) basis. It answers: does each customer generate more revenue than they cost to acquire and serve? The key metrics are Customer Lifetime Value (LTV), Customer Acquisition Cost (CAC), LTV:CAC ratio, and CAC payback period.
- What is a good LTV:CAC ratio?
- The benchmark is 3:1 — each customer should generate at least 3x their acquisition cost in gross profit. Below 1:1 means you lose money per customer. 1-3x is marginally profitable. 3-5x is healthy. Above 5x may indicate you could invest more aggressively in growth. Most VCs consider 3:1 the minimum for a fundable business.
- What is CAC payback period?
- CAC payback period is the number of months it takes for a customer to generate enough gross profit to cover their acquisition cost. Shorter is better — ideally under 12 months for SaaS, under 6 months for e-commerce. It tells you how quickly you recoup your acquisition investment and can reinvest in growth.
- Why do unit economics matter for startups?
- Unit economics determine whether your business model is viable at scale. A startup with negative unit economics will lose more money as it grows — scaling makes the problem worse, not better. Investors use unit economics to assess whether additional funding will create value or just fuel unsustainable growth.
- How can I improve my unit economics?
- You can improve unit economics by: (1) increasing LTV through upsells, price increases, or reducing churn, (2) decreasing CAC through better targeting, organic channels, or improved conversion rates, (3) improving gross margins by reducing cost of goods sold, or (4) extending customer lifespan through better onboarding and support.