Unit Economics Calculator
Calculate LTV, CAC ratio and payback period for your business.
Results
Unit economics measure whether each customer is profitable and how long it takes to recoup the cost of acquiring them. LTV (lifetime value) is the total gross profit a customer generates. The LTV:CAC ratio compares that value to the customer acquisition cost. A ratio above 3:1 is generally considered healthy for a sustainable business.
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Frequently asked questions
LTV (Lifetime Value) is the total gross profit a customer generates during their relationship with your business. LTV = Average Revenue per User × Gross Margin × Average Customer Lifetime. For a $50/month user with 70% margin over 24 months: LTV = $50 × 0.70 × 24 = $840.
3:1 or higher is the benchmark. Below 1:1 means you lose money on every customer. 1:1 to 3:1 is marginal. Above 5:1 might mean you are underinvesting in growth.
Payback period is how many months until a customer's cumulative gross profit covers the acquisition cost. CAC of $200 with $35/month gross profit = 6 months payback. Shorter is better - under 12 months is ideal for most businesses.
Improve conversion rates (better landing pages, clearer value proposition), focus on organic channels (SEO, content, referrals), optimize ad targeting, or increase word-of-mouth through product quality.
Reduce churn (improve product, customer support, onboarding), increase average revenue (upsell, cross-sell, price increases), or expand to adjacent products that extend the customer relationship.