── ── Startups
Unit Economics — CAC, LTV & Payback Discipline
Unit economics answer one question: does one customer make or lose money, and how fast do you get the money back? Growth on broken unit economics accelerates losses. The three numbers: CAC (fully-loaded cost to acquire a customer), LTV (gross-margin contribution over the customer's life), and payback period (months to recover CAC). Cash-constrained SMBs live or die on payback, not…
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How it works
1. Compute CAC fully loaded — all sales+marketing spend ÷ customers acquired (include tools, labor, not just ad spend). 2. Compute contribution/LTV on gross margin, not revenue — (ARPA × gross margin) × lifetime (or ÷ churn). Gate: LTV on revenue instead of margin overstates health — redo on margin. 3. Compute payback = CAC ÷ monthly gross-margin per customer. For cash-tight SMBs this is the binding constraint. 4. Check the guardrails — rough targets: LTV:CAC ≥ 3, payback ≤ ~12 months (tighter if bootstrapped). Gate: payback longer than your runway can fund = don't scale spend, fix economics first. 5. Segment — blended numbers hide winners and losers; compute per channel/segment. 6. Decide: scale the segments that pay back fast; fix or cut the rest.
When to use it
- deciding whether to spend more on growth
- 'is this business actually profitable per customer', 'can we afford ads', raising or budgeting
- CAC, LTV, payback, contribution margin
When not to use it
pre-revenue with no cost data (estimate ranges instead) or the question is company-level P&L, not per-customer.
Worked example
Unit Economics — CAC, LTV & Payback Discipline
Unit economics answer one question: does one customer make or lose money, and how fast do you get the money back? Growth on broken unit economics accelerates losses. The three numbers: CAC (fully-loaded cost to acquire a customer), LTV (gross-margin contribution over the customer's life), and payback period (months to recover CAC). Cash-constrained SMBs live or die on payback, not…
Install this skill (free, MIT)
npx skills add deciqAI/knowledge-skillsUseful? Star the repo — stars help other builders find it.
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