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Unit Economics and CAC/LTV: The Metrics Every Startup Financial Model Needs

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Where the a16z essay defines the metrics, this one reads like an audit checklist for the model you just built. It names eight frequent errors in plain language, from forgetting the hidden costs that understate CAC to inflating retention with no data behind it, so you can run your own numbers against the list line by line. It is framed squarely around the founder's financial model, which is exactly where these mistakes get baked in.

  • Founders routinely understate CAC by leaving out salaries, tool costs, sales commissions, and agency fees, then wonder why real spend never matches the model.
  • A blended CAC hides the truth: segment by channel, because organic and paid, or Google Ads and events, have very different economics that a single average papers over.
  • Two quieter traps are assuming CAC keeps improving forever (early adopters are cheaper than later customers) and inflating LTV with retention assumptions your data does not support.
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The question it answers

  1. What are the most common mistakes founders make when they build their first unit economics model?

Read with it

  1. The reference primer on the metrics and market-sizing logic investors use, including bottom-up market sizing that keeps... a16z Article · ~15 min read 16 Startup Metrics Andreessen Horowitz (a16z)
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