Unit Economics Calculator

Calculate customer lifetime value (LTV), LTV:CAC ratio, CAC payback period, and contribution margin from ARPU, gross margin, and churn rate. Free SaaS unit economics dashboard with chart and table.

What is Unit Economics Calculator?

The Unit Economics Calculator combines the core metrics every subscription or recurring-revenue business needs to evaluate whether its growth is actually profitable: customer lifetime value (LTV), the LTV:CAC ratio, CAC payback period, and contribution margin — all calculated from four inputs you likely already track: average revenue per customer, gross margin, monthly churn, and customer acquisition cost.

Formula

Gross Margin per Customer = ARPU × Gross Margin %. Average Customer Lifetime (months) = 1 ÷ Monthly Churn Rate. LTV = Gross Margin per Customer × Average Customer Lifetime. LTV:CAC Ratio = LTV ÷ CAC. CAC Payback Period (months) = CAC ÷ Gross Margin per Customer.

How to Calculate

Enter your average monthly revenue per customer (ARPU).
Enter your gross margin percentage (revenue minus direct costs, as a % of revenue).
Enter your average monthly customer churn rate.
Enter your customer acquisition cost (CAC) — total sales and marketing spend divided by new customers acquired.
Review your LTV, LTV:CAC ratio, CAC payback period, and the month-by-month chart comparing cumulative margin to CAC.

Example

A SaaS company with $100/month ARPU, 75% gross margin, 5% monthly churn, and $500 CAC has a gross margin per customer of $75/month, an average customer lifetime of 20 months, an LTV of $1,500, an LTV:CAC ratio of 3:1, and a CAC payback period of 6.7 months — a healthy unit economics profile by industry standards.

Key Benefits

See your complete unit economics picture — LTV, CAC payback, and ratio — from four simple inputs
Visualize exactly when cumulative gross margin surpasses acquisition cost with the crossover chart
Quickly test how changes in churn, margin, or CAC shift your overall unit economics health
Export your full monthly breakdown as PDF, Excel, or CSV for board decks or investor updates

Common Mistakes to Avoid

Using total revenue instead of gross margin, which overstates LTV and understates payback period
Ignoring churn rate changes over a customer's lifetime and treating it as constant when early-tenure churn is often much higher
Comparing blended CAC across all channels instead of segmenting by channel to find your most (and least) efficient acquisition sources

Pro Tips

Recalculate unit economics quarterly, since churn, margin, and CAC often shift meaningfully as a business matures
If your LTV:CAC ratio is very high (5:1+), consider whether you're underspending on growth relative to your available capital
Segment this calculation by customer cohort or acquisition channel rather than relying on a single blended number

Key Terms Explained

ARPU: Average Revenue Per User/Customer, typically measured monthly
Gross Margin: Revenue minus direct costs of serving a customer, expressed as a percentage of revenue
LTV (Lifetime Value): The total gross margin a business expects to earn from a customer over their entire relationship
CAC (Customer Acquisition Cost): Total sales and marketing spend divided by the number of new customers acquired in that period

Common Use Cases

Evaluating whether current marketing and sales spend is sustainable before scaling further
Comparing unit economics across different customer segments or acquisition channels
Preparing fundraising materials that require clear LTV:CAC and payback metrics
Deciding whether to invest more in retention (reducing churn) or acquisition (lowering CAC)

Frequently Asked Questions

What is a healthy LTV:CAC ratio?

A ratio of 3:1 or higher is generally considered healthy — meaning you earn 3x what you spend acquiring each customer. Below 1:1 means you're losing money on every customer. Above 5:1 can sometimes indicate you're underinvesting in growth and could acquire customers faster by spending more.

What counts as a good CAC payback period?

For SaaS businesses, a payback period under 12 months is considered strong, and under 18 months is generally acceptable. Longer payback periods mean more cash is tied up before a customer becomes profitable, which increases the capital needed to grow and the risk if churn is higher than expected.

Why use gross margin instead of full revenue in this calculation?

LTV and payback period should reflect the actual profit you keep per customer, not gross revenue. Using ARPU × gross margin gives you the contribution margin per customer — the amount left over after direct costs (hosting, support, payment processing) that actually pays back your acquisition cost.

How is customer lifetime calculated from churn rate?

Average customer lifetime in months is approximately 1 ÷ monthly churn rate. For example, a 5% monthly churn rate implies an average lifetime of 20 months (1 ÷ 0.05). This is a simplified approximation that assumes constant churn — actual lifetime curves are often not perfectly exponential, especially early in a customer's tenure.