Compute CAC, contribution margin, LTV, LTV:CAC, and payback with honest definitions, a runnable calculator, and a verdict on whether each customer makes money. Use when someone asks "what's my CAC", "is my LTV:CAC healthy", "how long is my payback period", "can I afford to spend more on ads", or before scaling acquisition spend. Do NOT use for gym-specific front-end economics and Client-Financed Acquisition - use gym-money-model instead; for multi-year revenue projections and MRR bridges use revenue-modeling; for cohort-level retention and growth diagnosis use growth-accounting.
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name: Unit Economics
description: Compute CAC, contribution margin, LTV, LTV:CAC, and payback with honest definitions, a runnable calculator, and a verdict on whether each customer makes money. Use when someone asks "what's my CAC", "is my LTV:CAC healthy", "how long is my payback period", "can I afford to spend more on ads", or before scaling acquisition spend. Do NOT use for gym-specific front-end economics and Client-Financed Acquisition - use gym-money-model instead; for multi-year revenue projections and MRR bridges use revenue-modeling; for cohort-level retention and growth diagnosis use growth-accounting.
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# Unit Economics
Unit economics answer one question: does each customer make money, and how fast? Get the definitions wrong and you will scale a business that loses money faster the more it grows - the most expensive spreadsheet error a founder can make, because the flattering version of CAC and LTV looks fine right up until the cash runs out. This skill enforces honest math.
## Operating procedure
Work in order: definitions first, blended numbers second, segmented numbers third, verdict last. A verdict on blended numbers alone is not a verdict.
### Step 1: Gather inputs
Collect for a single recent period (a month or quarter). If a number is a guess, label it a guess and refine later.
1. Fully-loaded sales and marketing spend for the period: salaries, tools, ad spend, commissions - not ad spend alone. The most common mistake is counting ad spend only and ignoring people.
2. New customers acquired in the same period. Same-period matching keeps CAC honest; for long sales cycles, lag spend by the average cycle length and note the adjustment.
3. ARPA: average monthly revenue per account.
4. Variable cost to serve one customer per month: hosting, payment fees, support, third-party APIs. Not rent, not R&D.
5. Monthly customer churn rate. If unknown, estimate from cancellations / customers-at-start and label it a guess.
6. The available splits: channel, segment or size, and cohort.
### Step 2: Compute the four core metrics… load the full skill through Skill Me