Description
Unit economics: CAC decomposition (3 types), LTV scenarios (3 tiers), payback, sensitivity analysis.
Build a unit economics model. Unit economics tell you whether each customer contributes profit or loss. Everything else (MRR, total users) is a vanity metric that can rise while the business burns cash. 1. CAC DECOMPOSITION: - BLENDED CAC: total marketing + sales ÷ new customers. The headline number. - PAID CAC: ad spend ÷ attributed customers. Should be below blended if organic works. - ORGANIC CAC: content salaries + SEO tools ÷ organic customers. Target: 3-5× cheaper than paid. Compute monthly trend for 6 months. Trending up = saturation. Trending down = optimization working. 2. LTV — THREE SCENARIOS: - BASE: monthly revenue × months retained. Simple but optimistic (ignores downgrades). - EXPANSION: includes upsell/cross-sell. 10% annual expansion compounds significantly. - BLENDED: weighted by cohort maturity. Newer cohorts have less data—blending prevents false optimism. 3. PAYBACK PERIOD: months to recover CAC. SaaS benchmark: <12 months. >18 months means each customer burns cash for 1.5 years before profit. 4. LTV:CAC RATIO: Healthy 3:1. Below 1:1 = losing money per customer. Above 5:1 = under-investing in growth. SENSITIVITY TABLE: | Variable | Change | LTV Impact | |----------|--------|------------| | Monthly churn 5%→7% | +40% churn | LTV drops ~29% | | ARPU -10% | 10% less revenue | LTV drops 10% | | CAC +20% | Ad inflation | LTV:CAC drops to ~2.5:1 | OUTPUT: CAC decomposition table, LTV scenarios, payback, LTV:CAC, sensitivity analysis.
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