Money, pricing & model

Unit economics & modeling

Know what a customer costs and earns.

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What are unit economics and why do they matter? Unit economics is the profit or loss on a single customer or unit, strip away the noise and ask 'do I make money on one customer?' If the answer is... Beginner 3 resources → How do I calculate CAC (customer acquisition cost) and LTV? CAC = total sales and marketing spend divided by new customers acquired in that period, count everything, not just ad spend. LTV = the profit (not ... Intermediate 3 resources → What is a good LTV to CAC ratio? The rule of thumb is LTV:CAC of at least 3:1, earn back roughly three times what it costs to acquire a customer. Below 1:1 you lose money on every ... Intermediate 3 resources → What metrics should I actually track as an early-stage SaaS founder? Early on, obsess over MRR growth, churn, gross margin, and CAC payback, ignore vanity metrics like downloads and pageviews. Net revenue retention t... Intermediate 3 resources → How do I build a simple financial model or revenue projection? Build bottom-up from real drivers, leads, conversion rate, price, churn, not top-down from 'we'll grab 1% of a huge market.' A useful early model f... Intermediate 3 resources → What is churn and how much churn is too much? Churn is the rate customers leave, and it silently caps your growth because you're refilling a leaky bucket. For SMB SaaS, ~3-5% monthly is common ... Intermediate 2 resources → My CAC looks great but I paid for it with a founder-led discount. How do I know my unit economics without the promo? Discounts and founder hustle hide your real acquisition cost, so run two versions: the promo number and the number when a stranger buys at list pri... Intermediate 2 resources → 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? With three months of data you cannot compute a trustworthy LTV, so stop trying to project lifetime and instead track a shorter window you can actua... Advanced 3 resources → What is contribution margin and why do people say it matters more than gross margin for a startup? Gross margin is revenue minus the direct cost of delivering your product, while contribution margin also strips out the variable costs to serve and... Beginner 2 resources → 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? CAC payback is how many months of contribution margin it takes to earn back what you spent acquiring a customer, and it directly drives how much ca... Advanced 3 resources → I sell a one-time product, not a subscription. Do unit economics and LTV even apply to me? They absolutely apply, but LTV comes from repeat purchases and referrals rather than a subscription, so your key questions become purchase frequenc... Intermediate 2 resources → What are the most common mistakes founders make when they build their first unit economics model? The classic traps are using blended CAC to hide bad paid channels, ignoring the cost to serve and support, assuming churn stays flat forever, and t... Intermediate 2 resources → How should I think about pricing so my unit economics actually work, instead of guessing a number and hoping? Price off the value you create and the economics you need, not off your costs or a competitor's list price, and then check that the resulting contr... Intermediate 3 resources → How do unit economics differ when I'm building for Indian customers versus selling in dollars to global users? Indian pricing power is lower and payment costs, GST, and support expectations shift your margins, so a model that works at 50 dollars a month can ... Advanced 3 resources → At what point in my journey should I actually start caring about unit economics, versus just focusing on getting users? Before product-market fit, obsessing over unit economics is premature because you're still changing the product, the price, and the customer. But y... Beginner 2 resources → How do I model unit economics for a marketplace where I have to acquire both supply and demand? A marketplace has two CACs (one for each side) and its economics only work when the take rate on transactions eventually covers both, so you must m... Advanced 3 resources → Investors keep asking about my "magic number" and payback efficiency. What are these and do they matter at my stage? The magic number measures how much new recurring revenue each rupee of sales and marketing generated, and it's really a sales-efficiency check that... Advanced 2 resources → My unit economics work on a spreadsheet but I'm bleeding cash every month. Why the disconnect and what do I fix first? Positive unit economics per customer can still coexist with a cash crunch because fixed costs (salaries, tools, rent) and the timing gap between sp... Intermediate 3 resources →

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