Unit Economics: The 7 Numbers Every Founder Should Know

CAC, LTV, payback, churn, gross margin, conversion rate and break-even — what they mean and healthy ranges.

Revenue tells you how big a business is. Unit economics tell you whether growing it is a good idea. These seven numbers fit on one page and answer most investor and strategy questions.

1. Customer acquisition cost (CAC)

Sales and marketing spend divided by new customers in the same period. Include salaries and tools, not just ad spend.

2. Gross margin

Revenue minus direct costs of delivering the product, as a percentage of revenue. It sets how much of each sale is available to repay CAC.

3. Churn

The share of customers lost per month. Average lifetime is roughly 1 ÷ monthly churn: 4% churn implies about 25 months.

4. Lifetime value (LTV)

30 a month at 80% margin with 4% churn gives an LTV of 600.

5. LTV : CAC

A common benchmark for subscription businesses is 3× or better. Below 1× you lose money on every customer; far above 5× may mean you are under-investing in growth.

6. CAC payback

Months of gross profit needed to recover CAC. With CAC of 150 and 24 of monthly gross profit per customer, payback is 6.25 months.

7. Conversion rate

The share of visitors or leads who become customers. Improving conversion lowers CAC without touching the ad budget.

Putting it together

Track these monthly, by cohort and by channel. Blended averages hide weak channels. When one number moves, re-run the others: a churn increase from 4% to 5% cuts LTV by 20%.

Use the CAC & LTV calculator and conversion rate calculator with your own data.