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Unit economics · checked 11 November 2026
Margin is profit divided by revenue; a sale pays when its contribution margin is positive and a customer earns back their CAC within 12 months.
Gross margin is revenue minus cost of goods sold, over revenue, and contribution margin also takes off shipping, payment fees and ad spend per order. A Rs 300 item sold at Rs 500 is a 40% margin but a 67% markup, and break-even units are fixed costs divided by what each sale leaves. Investors use an LTV to CAC ratio of 3 as a rough benchmark; work on prices excluding GST throughout.
Every question on it 33 answers
- How do I calculate profit margin and ROI? Starting Up
- How do I calculate gross margin? Starting Up
- What is EBITDA, and how do I calculate it? Starting Up
- How do I calculate my break-even point? Starting Up
- How do I work out CAC payback when I do not have a finance team? GTM
- How do I calculate CAC (customer acquisition cost) and LTV? Starting Up
- What does a healthy LTV to CAC ratio look like for an early bootstrapped Indian SaaS startup, and when is it too early to even care? Starting Up
- How do I calculate my target CAC before I've made a single sale? Starting Up
- How do I calculate my true CAC, not just what the ad platform reports? D2C
- What LTV:CAC ratio should my Indian D2C brand actually be targeting? D2C
- How do I figure out my unit economics before I have real customers? Starting Up
- What's the difference between gross margin and contribution margin, and which one should I obsess over? Starting Up
- What are unit economics and why do they matter? Starting Up
- What is a good LTV to CAC ratio? Starting Up
- My CAC looks great but I paid for it with a founder-led discount. How do I know my unit economics without the promo? Starting Up
- How do I estimate LTV when I have only three months of data and no idea what my real churn or retention curve is yet? Starting Up
- What is contribution margin and why do people say it matters more than gross margin for a startup? Starting Up
- My business has a big upfront cost per customer that pays back over months. How do I model CAC payback period so I don't run out of cash? Starting Up
- I sell a one-time product, not a subscription. Do unit economics and LTV even apply to me? Starting Up
- What are the most common mistakes founders make when they build their first unit economics model? Starting Up
- How do unit economics differ when I'm building for Indian customers versus selling in dollars to global users? Starting Up
- At what point in my journey should I actually start caring about unit economics, versus just focusing on getting users? Starting Up
- How do I model unit economics for a marketplace where I have to acquire both supply and demand? Starting Up
- What are the most common ways bootstrapped founders accidentally kill their own margins? Starting Up
- What unit economics numbers should I actually be tracking every week, CM1, CM2, contribution margin? D2C
- What is contribution margin for a D2C brand, and what do CM1, CM2 and CM3 mean? D2C
- How do I calculate CAC, and what's the difference between blended CAC and new-customer CAC? D2C
- What does a healthy CM1 / CM2 / CM3 actually look like for an Indian D2C brand? D2C
- My revenue keeps growing but I'm still losing money. Why does that happen? D2C
- How do I factor RTO, returns, COD, shipping and discounts into my true margin? D2C
- What's a good LTV:CAC ratio, and when is my D2C brand actually profitable? D2C
- How do I model my D2C unit economics in a spreadsheet, and how many orders do I need to break even? D2C
- How do I calculate customer LTV for my D2C brand - on revenue or on margin? D2C
Tools that do it for you
The readingMost used across these answers
- Startup Pricing 101 Watch · 12 answers
- 16 Startup Metrics Read · 5 answers
- Why Do Investors Care So Much About LTV:CAC? Read · 5 answers
- SaaS Metrics 2.0: A Guide to Measuring and Improving What Matters Read · 4 answers
- Contribution Margin vs. Gross Margin: What's the Difference? Read · 4 answers
- SaaS Metrics 2.0, Detailed Definitions Read · 4 answers
- D2C Unit Economics: 16 Metrics Every E-commerce Startup Should Know Read · 4 answers
- What is the difference between gross margin and contribution margin? Read · 3 answers
- Ecommerce Unit Economics 2026: The Complete Founder's Framework Read · 3 answers
- What Is Blended CAC vs Paid CAC? Read · 2 answers
The terms
Unit EconomicsGross MarginContribution MarginCustomer Acquisition CostLifetime ValueEBITDA
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