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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

  1. How do I calculate profit margin and ROI? Starting Up
  2. How do I calculate gross margin? Starting Up
  3. What is EBITDA, and how do I calculate it? Starting Up
  4. How do I calculate my break-even point? Starting Up
  5. How do I work out CAC payback when I do not have a finance team? GTM
  6. How do I calculate CAC (customer acquisition cost) and LTV? Starting Up
  7. 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
  8. How do I calculate my target CAC before I've made a single sale? Starting Up
  9. How do I calculate my true CAC, not just what the ad platform reports? D2C
  10. What LTV:CAC ratio should my Indian D2C brand actually be targeting? D2C
  11. How do I figure out my unit economics before I have real customers? Starting Up
  12. What's the difference between gross margin and contribution margin, and which one should I obsess over? Starting Up
  13. What are unit economics and why do they matter? Starting Up
  14. What is a good LTV to CAC ratio? Starting Up
  15. 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
  16. 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
  17. What is contribution margin and why do people say it matters more than gross margin for a startup? Starting Up
  18. 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
  19. I sell a one-time product, not a subscription. Do unit economics and LTV even apply to me? Starting Up
  20. What are the most common mistakes founders make when they build their first unit economics model? Starting Up
  21. How do unit economics differ when I'm building for Indian customers versus selling in dollars to global users? Starting Up
  22. At what point in my journey should I actually start caring about unit economics, versus just focusing on getting users? Starting Up
  23. How do I model unit economics for a marketplace where I have to acquire both supply and demand? Starting Up
  24. What are the most common ways bootstrapped founders accidentally kill their own margins? Starting Up
  25. What unit economics numbers should I actually be tracking every week, CM1, CM2, contribution margin? D2C
  26. What is contribution margin for a D2C brand, and what do CM1, CM2 and CM3 mean? D2C
  27. How do I calculate CAC, and what's the difference between blended CAC and new-customer CAC? D2C
  28. What does a healthy CM1 / CM2 / CM3 actually look like for an Indian D2C brand? D2C
  29. My revenue keeps growing but I'm still losing money. Why does that happen? D2C
  30. How do I factor RTO, returns, COD, shipping and discounts into my true margin? D2C
  31. What's a good LTV:CAC ratio, and when is my D2C brand actually profitable? D2C
  32. How do I model my D2C unit economics in a spreadsheet, and how many orders do I need to break even? D2C
  33. How do I calculate customer LTV for my D2C brand - on revenue or on margin? D2C

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Unit EconomicsGross MarginContribution MarginCustomer Acquisition CostLifetime ValueEBITDA

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