Find out if your startup’s business model is actually working
This free unit economics calculator tells you your Customer LTV, LTV:CAC ratio, and payback period in seconds. Enter four numbers, get a clear verdict on whether your business model is healthy enough to scale.
Every startup founder tracks revenue. Very few track unit economics — and that’s exactly why most startups run out of money before they figure out what went wrong.
How to Use This Calculator
CAC (Customer Acquisition Cost) The total amount you spend on marketing and sales divided by the number of new customers acquired. If you spent ₹50,000 last month and got 100 customers, your CAC is ₹500.
Monthly Revenue per Customer The average amount a single customer pays you every month. For subscription businesses this is your MRR per user. For one-time purchase businesses, divide average order value by average months between purchases.
Monthly Churn Rate The percentage of customers who stop using your product each month. If you have 200 customers and 10 leave every month, your churn rate is 5%.
Gross Margin Revenue minus the direct cost of delivering your product, expressed as a percentage. A SaaS product might have 80% gross margin. A food delivery business might have 20-30%.
Not sure what these terms mean? Read our breakdown of why CRED’s business model works — it covers loss leaders, data monetisation, and sunk cost psychology in plain English.
Use this unit economics calculator by entering four numbers — CAC, monthly revenue, churn rate, and gross margin.
How This Unit Economics Calculator Works
According to Andreessen Horowitz, a 3:1 LTV:CAC ratio is the minimum benchmark for a scalable startup.
Understanding Your Results
LTV (Customer Lifetime Value) The total revenue one customer generates before they churn. A higher LTV means each customer is more valuable — and you can afford to spend more acquiring them.
LTV:CAC Ratio The single most important number in startup unit economics. It tells you how much you make for every rupee/dollar spent acquiring a customer.
| LTV:CAC Ratio | What It Means |
|---|---|
| Below 1:1 | Losing money on every customer |
| 1:1 to 3:1 | Alive but fragile — do not scale |
| 3:1 to 5:1 | Healthy — safe to grow |
| 5:1 and above | Exceptional — scale aggressively |
Payback Period How many months it takes to recover your CAC from a customer’s gross profit. Under 12 months is considered healthy for most startups. Over 24 months means you need significant capital to grow.
FAQ Section
Unit Economics Calculator FAQ
Frequently Asked Questions
What is a good LTV:CAC ratio for a startup? The industry benchmark is 3:1 — meaning for every ₹1 spent acquiring a customer, you should make ₹3 back over their lifetime. Anything below 1:1 means your business model is fundamentally broken. Above 5:1 is considered exceptional and signals you can scale aggressively.
What is unit economics in simple terms? Unit economics means the revenue and costs directly tied to one single customer — one “unit.” If acquiring one customer costs more than they’ll ever pay you, your business loses money no matter how fast you grow. Unit economics tells you whether growth makes things better or just faster at losing money.
What is a good payback period for a startup? Under 12 months is considered healthy. Under 6 months is strong. If your payback period is over 24 months, you need significant outside capital just to grow — because you’re funding each customer for two years before breaking even on them.
What is churn rate and why does it matter? Churn rate is the percentage of customers who leave your product every month. Even a small difference in churn has a massive impact on LTV. A business with 2% monthly churn has customers for an average of 50 months. A business with 10% monthly churn loses them in 10 months. Reducing churn is often more valuable than acquiring new customers.
What is CAC and how do I calculate it? CAC stands for Customer Acquisition Cost. Calculate it by dividing your total sales and marketing spend in a period by the number of new customers acquired in that same period. If you spent $10,000 on marketing in a month and got 50 new customers, your CAC is $200.
Can I use this calculator for non-subscription businesses? Yes. For non-subscription businesses, estimate your monthly revenue per customer by dividing average order value by the average number of months between purchases. For churn, estimate the percentage of customers who never buy from you again each month.
What is gross margin and what’s a healthy number? Gross margin is your revenue minus the direct costs of delivering your product, divided by revenue. Software (SaaS) companies typically have 70-90% gross margins. E-commerce businesses typically have 20-50%. Service businesses vary widely. Higher gross margin means more of each rupee/dollar goes toward profit and growth.
Bookmark this unit economics calculator and run your numbers every quarter as your startup grows.
Learn the MBA concepts behind these numbers
Unit economics, LTV, CAC, churn — these aren’t just spreadsheet terms. They’re the frameworks that separate startups that scale from startups that quietly die.
Every week, CasualMBA breaks down one business concept like this — using real startups you already know, in plain English.