Unit economics calculator
Strip the business down to one customer. If that one customer makes money, the business can. If not, scale makes it worse.
What this tool does
Unit economics is the most important question in any business you intend to grow: does a single customer, on their own, make you money? Many startups grow revenue for years before realising that every new customer makes them poorer than the last one. Once you scale a broken unit, no marketing budget in the world can save you.
How to use it
- Calculate average revenue per customer over their full relationship.
- Subtract variable cost to serve that customer (delivery, support, payment processing).
- Subtract acquisition cost (the share of marketing and sales spend attributable to that customer).
- What's left is contribution margin per customer.
- Divide acquisition cost by monthly contribution margin to get payback period in months.
Why it matters
A business with positive unit economics can be scaled by adding more customers. A business with negative unit economics will lose more money the bigger it gets. The math is brutal and unforgiving — and it is the first thing any sophisticated investor or acquirer will model. Get ahead of them.
Questions people actually ask.
What's a payback period?
How many months it takes for a customer to pay back what you spent acquiring them. Under 12 months is healthy for SaaS; under 6 is excellent; over 24 starts to look like a financing problem rather than a business problem.
What if my customers don't pay monthly?
Translate everything to monthly equivalents. An annual subscription of $1,200 with a 90% renewal rate has an expected lifetime of about 10 years and an effective monthly revenue of $100. Run the math on monthly numbers.
Does this work for one-time purchases?
Yes, with a tweak. For one-time sales, lifetime value is just the average margin per order (or per customer if they buy more than once). The ratio of LTV to acquisition cost still tells you whether the business model is viable.