Unit Economics Formula
Unit economics weighs what a customer is worth against what they cost to win. This calculator estimates lifetime value from monthly ARPU, gross margin, and average lifespan, then divides it by customer acquisition cost to give the LTV:CAC ratio that shows whether the model can scale.
Bottom Line
Unit economics weighs what a customer is worth against what they cost to win. This calculator estimates lifetime value from monthly ARPU, gross margin, and average lifespan, then divides it by customer acquisition cost to give the LTV:CAC ratio that shows whether the model can scale.
Unit Economics Calculator
Evaluate LTV:CAC ratio, payback period, and per-customer viability.
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Formula
Copy the exact expression or work through it step by step below.
LTV = Monthly ARPU x Gross Margin % x Avg Lifespan; LTV:CAC = LTV / CAC Variables
LTV
Lifetime Value
The gross-margin profit one customer generates over their expected lifespan, in currency units. The headline output, compared against acquisition cost.
ARPU
Monthly ARPU
Average revenue per user each month, in currency units. Multiplied by the gross margin to get the monthly contribution the calculator carries into LTV.
GM
Gross Margin %
The share of revenue left after variable delivery costs, as a percent. Only this portion of ARPU funds acquisition and profit.
L
Avg Lifespan Months
How many months the average customer stays, as a number. Longer lifespans raise LTV; the tool flags it if your churn rate implies a shorter one.
CAC
Customer Acquisition Cost
The fully loaded cost to win one customer, in currency units. The denominator of the LTV:CAC ratio; a ratio at or above 3 is the usual health bar.
Step By Step
- 1
Set the baseline case with the real calculator inputs.
CAC = $150, Monthly ARPU = 49, Gross Margin Percent = 75.0%, Avg Lifespan Months = 24
- 2
Turn revenue into monthly contribution by applying the gross margin to ARPU, since only the margin portion covers acquisition and profit.
A $49 ARPU at a 75% gross margin gives a $36.75 monthly contribution.
- 3
Apply the formula and read the first calculator outputs, not just the headline assumption.
The calculator lands with ltv at $882 and monthly contribution at $36.75.
- 4
Divide lifetime value by CAC to read the LTV:CAC ratio, and check the payback months so a strong ratio is not hiding slow cost recovery.
An $882 LTV against a $150 CAC is a 5.88 LTV:CAC ratio, with CAC paid back in about 4.1 months.
Worked Example
Unit Economics sample case
CAC
$150
Monthly ARPU
49
Gross Margin Percent
75.0%
Avg Lifespan Months
24
Contribution Margin = Revenue Per Unit - Variable Cost Per Unit using cac $150, monthly ARPU 49, gross margin percent 75.0%, avg lifespan months 24.
The calculator lands with ltv at $882 and monthly contribution at $36.75.
Common Variations
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Sources & References
- Unit Economics — Investopedia
- Startup CEO: A Field Guide to Scaling Up Your Business — Wiley (Matt Blumberg)
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