Unit Economics

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---
name: Unit Economics
description: Calculate and improve CAC, LTV, payback, and contribution margin correctly.
---

# 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. This skill enforces honest math.

## The Four Core Metrics

### CAC (Customer Acquisition Cost)
Fully-loaded: all sales and marketing spend (salaries, tools, ad spend,
commissions) divided by new customers in the same period. The most common
mistake is counting ad spend only and ignoring people.

### Contribution Margin
Revenue per customer minus the variable cost to serve them (hosting, payment
fees, support, third-party APIs). This is the real margin that funds CAC and
overhead — not gross revenue.

### LTV (Lifetime Value)
LTV = (ARPA × gross margin %) / churn rate. Use gross margin, never raw… install to load the full skill