Break Down Unit Economics: CAC, LTV, and Payback

Unit economics get quoted constantly — CAC, LTV, payback — but the math behind them is easy to muddle, especially when people compare a revenue-based LTV against a gross-margin-based CAC. This prompt forces a clean, auditable calculation where every formula and intermediate number is shown, so you and your reader can see exactly how the result was built. The interpretation layer is what makes it useful beyond a calculator. It tells you whether the numbers look healthy against common benchmarks, which single input the result hinges on, and one lever to pull. That sensitivity callout is the most valuable part: in early-stage models the answer is usually hostage to the churn assumption, and naming that keeps everyone honest. Because LTV depends entirely on an assumed churn rate, the prompt labels it an estimate rather than a realized figure. Use it to pressure-test your economics and to communicate them clearly, not to claim precision you don't have.

What you can expect back

Unit economics — Pro plan (estimates):

CAC = $120,000 / 300 = $400
Avg customer lifetime = 1 / 0.03 = ~33 months
Gross margin per customer/month = $80 × 80% = $64
LTV (margin-adjusted) = $64 × 33 = ~$2,112
LTV:CAC = $2,112 / $400 = ~5.3x
Payback = $400 / $64 = ~6.3 months

Interpretation: A ~5x LTV:CAC and ~6-month payback both sit comfortably inside common healthy ranges (LTV:CAC ≥ 3x, payback under 12 months). The result is most sensitive to the 3% monthly churn — at 5% churn, lifetime drops to ~20 months and LTV:CAC falls to ~3.2x. The strongest lever here is retention: a point of churn reduction moves LTV more than a comparable change in CAC.

Note: LTV is an estimate driven by the churn assumption, not a realized cash figure.

Illustrative example — your results will vary by tool and inputs.

Get sharper results

• 01State churn on the same basis as your revenue (monthly with monthly ARPA) so the lifetime math doesn't silently mismatch units.
• 02Always use gross-margin-adjusted LTV when comparing to CAC — revenue-based LTV flatters the ratio and isn't comparable.
• 03Ask for a quick table of LTV:CAC at a few churn rates; it's the fastest way to see how fragile a 'healthy' ratio is.
• 04If you blend self-serve and sales-led customers, run them separately — a blended CAC hides which motion actually pays back.

Adapt it for your case