Unit Economics in 5 Minutes: Calculate CAC, LTV and Payback on the Spot

You have a product, you have first customers, an investor is asking about your unit economics — and you're not sure you're calculating it right. This article isn't a textbook. It's a practical checklist: 4 metrics you need to calculate right now.

For a deep dive with industry benchmarks and cohort analysis — read the complete unit economics guide.

Step 1: Calculate CAC

CAC (Customer Acquisition Cost) — how much one customer costs you.

$CAC = \frac{\text{Total acquisition spend}}{\text{New customers in period}}$

Take last month's spend: ad budget + marketer salary + tools. Divide by number of new paying customers.

Example: Spent $10,000, got 200 customers. CAC = **$50**.

Step 2: Calculate ARPU

ARPU (Average Revenue Per User) — average monthly revenue per customer.

$ARPU = \frac{\text{Monthly revenue}}{\text{Active customers}}$

Example: Revenue $20,000, active customers 1,000. ARPU = **$20/mo**.

Step 3: Calculate LTV

LTV (Lifetime Value) — total revenue from one customer over their lifetime.

$LTV = \frac{ARPU}{\text{Churn Rate}}$

Churn Rate — percentage of customers who leave each month. If 5 out of 100 customers leave — churn = 5%.

Example: ARPU = $20, churn = 5$20 / 0.05 = $400.

Step 4: Check the ratio

Fill in your numbers:

What the result means

LTV/CAC > 3x — healthy economics. Scale your acquisition.

LTV/CAC = 1–3x — borderline. Work on reducing CAC or increasing LTV.

LTV/CAC < 1x — every new customer is a loss. Growth amplifies losses. Stop and rethink your model.

Payback < 12 mo — good. Customer pays back before you need the next round.

Payback > 18 mo — risky. Cash flow can't keep up with growth.

Calculate right now

Don't want to do the math? Enter 5 numbers into the unit economics calculator — it shows CAC, LTV, LTV/CAC, Payback and Break-even instantly.

Need a full model with acquisition channels, retention curves, and 36-month forecast? Create a P&L model in Prodwave — free, no Excel needed.

What's next

• Unit Economics: Complete Guide with Formulas and Benchmarks — cohort LTV, channel analysis, SaaS/e-commerce benchmarks
• Cohort Analysis: How to Read Retention Curves — why average churn lies and how to calculate correctly
• Unit Economics Calculator — instant calculation, no signup