How to Calculate Unit Economics
What is Unit Economics?
Analyzes revenue and costs at the per-customer level to determine profitability unit. Shows if the business model is viable before scaling.
Step-by-Step Guide
- 1Customer lifetime value (revenue across relationship)
- 2Customer acquisition cost (marketing and sales)
- 3Calculate ratio: CLV ÷ CAC
- 4Add gross margin analysis
- 5Ensure CAC payback < 12 months
Worked Examples
Input
$100 LTV, $30 CAC
Result
3.3:1
Common Mistakes to Avoid
- ✕Not including fully-loaded customer costs (support, ops)
- ✕Using gross revenue instead of net in CLV
Frequently Asked Questions
What's healthy unit economics?
CLV:CAC ratio 3:1+ minimum, CAC payback 12 months max, gross margin 70%+ for SaaS.
How do I improve unit economics?
Increase prices or usage, reduce churn, decrease CAC, or shift to higher-margin products.
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