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Unit Economics Explainer

Explains unit economics (CAC, LTV, contribution margin) for a business with a worked example. Educational, not financial advice.

VettedUpdated June 2026
The prompt
Explain the unit economics for {{business_type}}. Define and walk through CAC, LTV, contribution margin, and the LTV:CAC ratio using simple example numbers: {{inputs}}. Show what a healthy range looks like and one lever to improve each. End with: This is an educational explainer, not financial advice.
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Variables

business_typeBusiness type
inputsExample inputs

Example output

Unit economics for a subscription app. CAC (customer acquisition cost): total sales and marketing spend divided by new customers — example $5,000 / 250 = $20. LTV (lifetime value): average monthly revenue per user times gross margin times average lifespan in months — example $10 x 0.8 x 24 = $192. Contribution margin: revenue per unit minus variable costs — example $10 - $2 = $8. LTV:CAC ratio: 192 / 20 = 9.6, well above the often-cited healthy floor of 3. Levers: lower CAC with better targeting; raise LTV by reducing churn or adding upsells. This is an educational explainer, not financial advice.

Details

Author

AI Khazna

License

—

Security

Vetted

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