CORE MBA

Unit Economics

Unit Economics (LTV/CAC) Calculator

Scaling

Determine the scalability of your model by comparing LTV vs CAC. The DNA of sustainable scale.

LTV:CAC ratio5.0:1

Strategic deep theory

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THE DNA OF SCALE

Unit economics are the microscopic view of your business's ability to survive. If you cannot make a profit on a single customer, you will never make a profit on a million. Scaling a business with negative unit economics is not growth—it is a fast-tracked bankruptcy.

THE GOLDEN RATIO: LTV/CAC

The industry standard for a healthy, scalable business is a ratio of 3:1.

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LTV (Lifetime Value): The total gross profit a customer generates before they churn.

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CAC (Customer Acquisition Cost): The total cost of sales and marketing to acquire that customer.

If your ratio is 1:1, you are a charity for advertising platforms. If it is 5:1, you are growing too slowly and leaving the market open for more aggressive competitors.

TACTICAL Q&A

Q: My LTV is high but I'm still losing money. Why?
A: Check your 'Payback Period'. If it takes 18 months for a customer to pay back their CAC but you only have 6 months of cash runway, you will go bankrupt while growing.
Q: How do I improve my Unit Economics?
A: Two levers: Raise LTV by increasing retention (lower churn) or upselling. Lower CAC by optimizing your marketing funnel or improving conversion rates.

TERMS: CHURN VS RETENTION

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CHURN: The percentage of customers who leave. It is the 'leak' in your bucket. A 5% monthly churn means half your customers are gone in a year.

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RETENTION: The ability to keep a customer paying. High retention is the multiplier of LTV. Focus on the product experience to win here.

Contextual glossary

CAC[+]
LTV[+]
Churn[+]
ARPU[+]

Diagnostic report

Interpretation

"Healthy economics."

Identified pattern

EFFICIENT SCALE

Solution mastery required:

Unit Economics

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