💹

Unit Economics Analysis

Verifying business sustainability with LTV and CAC

An LTV/CAC ratio of 3:1 or higher is considered a healthy business. CAC Payback Period should ideally be within 12 months. Continuous tracking and improvement of these metrics is necessary for scaling.

Action Steps

1

Measure average revenue per user (ARPU) and churn rate

2

Calculate customer lifetime value: LTV = ARPU / Churn Rate

3

Calculate CAC by dividing marketing cost by new customers

4

Evaluate investment efficiency based on LTV/CAC ratio and Payback Period

Pros

  • Can objectively prove business profitability
  • Most persuasive metric for investors

Cons

  • Early-stage startups may lack data for accurate calculation
  • Wrong LTV predictions can lead to overinvestment

Use Cases

Pricing optimization for SaaS businesses Comparative ROI analysis by marketing channel

References