Unit Economics Calculator

Analyze per-unit profitability, contribution margin, LTV:CAC ratio, and customer acquisition efficiency with real-time calculations.

Input Business Metrics

Real-Time Results

Profit Per Unit
$65.00
Gross profit per customer
Contribution Margin
65%
Percentage of revenue as profit
Customer Lifetime Value
$1,857
Total revenue from a customer
LTV:CAC Ratio
12.38
Efficiency ratio
Payback Period
2.31 months
Time to recover acquisition cost
Break-Even Units
2.31 units
Units needed to cover acquisition cost
Profitability Status
HIGHLY PROFITABLE
Based on LTV:CAC > 3:1

Formulas & Calculations

Core Unit Economics Formulas

1. Profit Per Unit = Revenue Per Unit - Variable Cost Per Unit
P = R - VC
Where: P = Profit, R = Revenue, VC = Variable Costs
2. Contribution Margin (%) = (Profit Per Unit ÷ Revenue Per Unit) × 100
CM = (P ÷ R) × 100
Measures percentage of revenue that contributes to fixed costs and profit
3. Customer Lifetime Value (LTV) = (Revenue Per Unit × Gross Margin) ÷ Churn Rate
LTV = (ARPU × GM) ÷ CR
Where: ARPU = Average Revenue Per User, GM = Gross Margin, CR = Churn Rate
4. LTV:CAC Ratio = Customer Lifetime Value ÷ Customer Acquisition Cost
Ratio = LTV ÷ CAC
Ideal ratio: > 3:1 for sustainable business
5. CAC Payback Period = CAC ÷ (Revenue Per Unit × Gross Margin)
Payback = CAC ÷ (ARPU × GM)
Time required to recover customer acquisition costs

Practical Examples & Use Cases

SaaS Business Example

Scenario: Software company with $50/month subscription, 2% monthly churn, $300 acquisition cost.

Calculation: LTV = ($50 × 0.70 margin) ÷ 0.02 = $1,750. LTV:CAC = $1,750 ÷ $300 = 5.83 (Excellent).

E-commerce Example

Scenario: Online store with $80 average order, $45 variable costs, $100 acquisition cost, customers buy 3 times yearly.

Calculation: Profit per order = $35. Annual LTV = $35 × 3 = $105. LTV:CAC = 1.05 (Needs improvement).

Mobile App Example

Scenario: Free app with $0.05 average revenue per daily user, 5% daily churn, $0.80 acquisition cost.

Calculation: LTV = $0.05 ÷ 0.05 = $1.00. LTV:CAC = $1.00 ÷ $0.80 = 1.25 (Marginally profitable at scale).

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Frequently Asked Questions

What are unit economics and why are they important?

Unit economics refer to the direct revenues and costs associated with a single unit of business, typically measured per customer or per product. They are crucial because they determine whether your business model is fundamentally profitable at the individual transaction level before scaling. Positive unit economics (LTV > CAC) indicate sustainable growth potential.

What is a good LTV:CAC ratio for my business?

The ideal LTV:CAC ratio depends on your industry and growth stage:

  • > 3:1: Excellent - Sustainable and profitable
  • 2-3:1: Good - Healthy but monitor closely
  • 1-2:1: Concerning - May need optimization
  • < 1:1: Critical - Business loses money per customer

SaaS businesses often target 3:1 or higher, while e-commerce may operate profitably at 2:1.

How do I calculate Customer Lifetime Value accurately?

Use the formula: LTV = (Average Revenue Per User × Gross Margin %) ÷ Churn Rate. For more accuracy:

  1. Segment customers by acquisition channel
  2. Use cohort analysis for different time periods
  3. Include expansion revenue from upsells/cross-sells
  4. Account for variable costs accurately
  5. Use discounted cash flow for longer-term businesses

What's the difference between CAC and variable costs?

Customer Acquisition Cost (CAC) is the cost to acquire a new customer (marketing, sales, promotions). Variable costs are expenses directly tied to delivering your product/service (materials, shipping, transaction fees). CAC is typically a one-time cost per customer, while variable costs recur with each unit delivered.

How can I improve my unit economics?

Strategies to improve unit economics:

  • Increase LTV: Raise prices, reduce churn, upsell/cross-sell, improve product quality
  • Reduce CAC: Optimize marketing channels, improve conversion rates, leverage referrals
  • Lower variable costs: Negotiate with suppliers, improve operational efficiency
  • Shorten payback period: Offer annual plans, improve cash flow management

This professional Unit Economics Calculator is part of FinToolsPro's comprehensive suite of 200+ financial calculators for business analysis, investment planning, and tax optimization.