unit-economics-analysis

Unit Economics Analysis

Analyze the fundamental economics of the business — what it costs to acquire a customer, what that customer is worth, and how long it takes to earn back the acquisition cost. Break down by segment, channel, and cohort. Goal: understand which customers are profit-generating engines and which are destroying value.

Purpose

Blended metrics hide the truth. A 4x blended LTV/CAC ratio might look healthy, but if it's 10x for enterprise and 0.8x for SMB, the company has a ticking time bomb in one segment. This skill provides the segment-level and cohort-level analysis needed to make capital allocation decisions — where to invest more, what to fix, and what to stop doing.

When to Use

• "What's our CAC?"
• "Calculate LTV / CAC ratio"
• "Analyze payback period by segment"
• "Which customer segments are most profitable?"
• "Unit economics deep dive"
• "Are we making money on each customer?"

Inputs Required

1. Revenue by customer by month — for ARPU and churn calculations.
2. COGS by customer or segment — for gross margin.
3. S&M spend by channel and segment — for CAC.
4. Customer acquisition data — new logos by segment, source.

Quick Reference

Metric	Formula	Target
CAC	Total S&M spend / New customers acquired	Varies by segment
LTV	(ARPU × Gross Margin %) / Monthly Churn Rate	> 3× CAC
LTV / CAC	LTV / CAC	> 3x healthy, < 1x existential
CAC Payback	CAC / (ARPU × Gross Margin %)	< 12 months good
NRR	(Starting ARR + Expansion − Churn − Contraction) / Starting ARR	> 100% good, > 120% excellent

Procedure

1. Calculate Segment-Level Metrics

For each meaningful segment (industry, size, channel, geography):

CAC (Customer Acquisition Cost)

Blended CAC = Total S&M spend in period / New customers acquired in period

Fully loaded CAC = (S&M salaries + marketing spend + tools + overhead allocation) / New customers

Paid CAC = Marketing + ads spend only / New customers from paid channels