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Why we picked it This is a clean, plain-language walk through the numbers that decide whether your pricing actually works: contribution margin, CAC, LTV, and payback period. Written by Mercury's CFO, it connects the dots you need here, that moving from underpriced plans to value-based pricing and better-packaged tiers is what lifts LTV and contribution margin. Use it as a starting point to pressure-test whether the price you are considering leaves enough margin after you have paid to acquire the customer.
What is unit economics, and does it matter for your startup?
From Mercury by Dan Kang ~12 min read
- Contribution margin (price minus variable cost per unit) is the first thing to check, if it is thin or negative, no amount of scale fixes it.
- Pricing directly shapes revenue per unit and LTV, so raising or repackaging price is often the fastest lever on your economics.
- Read your LTV against CAC and payback period together, a price that looks fine in isolation can still lose money once acquisition cost is counted.