About the Unit Economics Calculator
Unit economics answer one question: does each customer you acquire make you money, and how quickly? This calculator takes four numbers — average monthly revenue per account (ARPA), gross margin, monthly churn and customer acquisition cost (CAC) — and turns them into contribution per customer, customer lifetime, lifetime value (LTV), LTV:CAC ratio and CAC payback period.
It suits subscription businesses, SaaS startups, subscription boxes and membership products, and is handy before a fundraise, when pricing a new plan or when deciding how much to spend on marketing. The chart shows cumulative gross profit from an average customer, accounting for churn, so you can see when acquisition cost is recovered.
LTV here is gross-margin based and undiscounted, using the common simplification that customers stay on average 1 ÷ churn months. Very low churn inflates LTV; many teams cap the lifetime at three to five years for planning.
With the default inputs, the ltv:cac ratio is 2.78 :1. Change any value above to recalculate instantly.
How to use the unit economics calculator
- 1Enter average monthly revenue per customer account.
- 2Enter your gross margin after hosting, support and payment costs.
- 3Enter monthly customer churn.
- 4Enter CAC: total sales and marketing spend divided by new customers.
- 5Check LTV:CAC and payback against the 3:1 and 12-month benchmarks.
Formula and method
Monthly contribution is the gross profit an average customer generates each month: revenue per account multiplied by gross margin. With a constant monthly churn rate, the average customer stays 1 ÷ churn months, so lifetime value is contribution divided by churn.
LTV:CAC compares that lifetime gross profit with the cost of acquiring the customer, and payback is how many months of contribution it takes to recover CAC (ignoring churn during payback). The chart applies churn month by month, so the curve flattens as customers leave.
- ARPA
- Average monthly revenue per account
- Gross margin
- Share of revenue left after cost of service
- Churn
- Share of customers lost each month
- CAC
- Fully loaded sales and marketing cost per new customer
Worked examples
Mid-market SaaS at $200/month
A $200 account at 75% margin contributes $150 a month. With 3% churn the average customer stays about 33 months, so LTV is $150 ÷ 0.03 = $5,000. Against $1,800 CAC that is 2.8:1, with a 12-month payback.
Low-price self-serve product
A $50 plan at 80% margin contributes $40 a month. Churn of 5% means a 20-month lifetime and $800 LTV. CAC of $300 is recovered in 7.5 months for a 2.7:1 ratio.
Enterprise contract
Enterprise accounts pay $2,000 a month at 70% margin ($1,400 contribution) and churn just 1% a month, giving $140,000 LTV. Despite a $30,000 CAC and a 21-month payback, LTV:CAC is a strong 4.7:1.
Frequently asked questions
What are unit economics?+
Unit economics measure the revenue and costs tied to a single unit of your business — for subscription companies, one customer. They show whether acquiring and serving each customer is profitable before fixed overheads.
What is a good LTV:CAC ratio?+
A ratio of about 3:1 is the widely used benchmark for SaaS. Below 1:1 you lose money on every customer; well above 5:1 can mean you are under-investing in growth.
What is a good CAC payback period?+
Many SaaS investors look for payback within 12 months for SMB products and up to about 18–24 months for enterprise, where customers churn less and contracts are larger.
Why use gross margin instead of revenue for LTV?+
Revenue-based LTV ignores the cost of serving customers. Using gross margin gives the profit actually available to repay acquisition cost, which is the fair comparison with CAC.
What should be included in CAC?+
Fully loaded CAC includes paid ads, marketing salaries, sales salaries and commissions, tools and agencies for a period, divided by the new customers won in that period.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.