Unit Economics Calculator
A unit economics calculator for subscription businesses: LTV, CAC payback and LTV:CAC on one customer — and, when the ratio falls short, which of the four levers actually closes the gap and which one cannot reach it at any value.
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Everything a subscription business earns and spends on one customer, in one table. Then the part most unit economics calculators leave out: if the ratio is short, which of the four levers actually closes the gap — and which one cannot, however hard you pull it.
Monthly. ARPA, not contract value.
Hosting, support, payment fees. Monthly.
Fully loaded: spend plus sales and marketing salaries.
Customer churn, not revenue churn.
| Per customer | On gross profit | On revenue |
|---|---|---|
| Monthly contribution | $80 | $100 |
| Expected lifetime80.0% margin | 33.3 months | |
| Lifetime value | $2,667 | $3,333 |
| CAC payback | 15.0 mo | 12.0 mo |
| LTV:CAC | 2.22× | 2.78× |
The right-hand column is the one most calculators report on its own. It is the same business measured before the cost of serving it, so it always reads better — by exactly the gross margin, no more and no less.
To reach 3×, on this lever alone
| Lever | Today | Would have to be | Change |
|---|---|---|---|
| Price (ARPA) | $100 | $128 | +28.0% |
| Cost to serve | $20 | not reachable | — |
| Monthly churn | 3.00% | 2.22% | -25.9% |
| CAC | $1,200 | $889 | -25.9% |
The smallest move is a tie: monthly churn or CAC, both by -25.9%. That is not a coincidence — the ratio is inversely proportional to each of them, so a percentage off churn and the same percentage off CAC are worth precisely the same. Pick whichever your team can actually deliver.
A lever marked not reachable cannot get you to 3× at any value — cost to serve bottoms out at zero, and if free service still leaves the ratio short, no amount of infrastructure work will fix it. Worth knowing before the quarter is spent trying.
Two simplifications. Lifetime is the reciprocal of churn, which assumes churn stays flat forever — real cohorts churn hardest early and then settle, so this tends to understate long-lived customers. And nothing here is discounted, so a dollar in month forty counts the same as one today. Both are the standard conventions, and both flatter long paybacks.
Unit economics get better when the product gets better faster than the spend does. If you are building largely on your own, Tekk turns what you want into specs your coding agent can actually execute.
The calculation
contribution per month = revenue − cost to serve
lifetime (months) = 1 ÷ monthly churn
LTV = contribution ÷ monthly churn
LTV:CAC = LTV ÷ CAC
payback (months) = CAC ÷ contribution
Four divisions. Every calculator on this subject agrees on them, which is why the interesting part is what comes after.
Worked example
$100 a month per customer, $20 to serve, $1,200 to acquire, 3% monthly churn.
| On gross profit | On revenue | |
|---|---|---|
| Contribution per month | $80 | $100 |
| Expected lifetime | 33.3 months | 33.3 months |
| Lifetime value | $2,667 | $3,333 |
| CAC payback | 15.0 months | 12.0 months |
| LTV:CAC | 2.22× | 2.78× |
The right-hand column is the one most tools report on its own. It is the same business measured before the cost of serving it, so it always reads better — by exactly the gross margin, no more and no less. On an 80% margin that is a quarter added to LTV and three months taken off payback.
Both columns fail the 3× bar here. The flattering one just fails by less, which is why it gets quoted.
The part that is missing everywhere else
Knowing the ratio is 2.22× does not tell you what to do. So invert the formula against a 3× target and ask what each input would have to become on its own:
| Lever | Today | Would have to be | Change |
|---|---|---|---|
| Monthly churn | 3.00% | 2.22% | −25.9% |
| CAC | $1,200 | $889 | −25.9% |
| Price | $100 | $128 | +28.0% |
| Cost to serve | $20 | not reachable | — |
Three things fall out of that table, and none of them are visible in the metrics alone.
Churn and CAC are exactly equally powerful. Not approximately — identically. The ratio is inversely proportional to both, so a quarter off churn and a quarter off CAC produce the same answer. The choice between them is entirely about which your team can actually deliver, and nothing in the arithmetic favours either.
Price is close behind, and it is the fastest to change. A 28% rise is a bigger move than a 26% churn reduction, but it takes a week rather than three quarters. Cheapest on paper is not the same as cheapest in practice.
Cost to serve cannot get there at all. A 3× ratio needs $108 of monthly gross profit from a customer paying $100. That is not available at any infrastructure cost, because the lever bottoms out at zero — free service still leaves the ratio short. It is worth knowing that before the quarter is spent on it, and no tool that only reports metrics will tell you.
Two conventions worth knowing about
Lifetime is 1 ÷ churn. This assumes churn stays flat forever. Real cohorts churn hardest in the first months and then settle, so the convention tends to understate long-lived customers and overstate short ones.
Nothing is discounted. A dollar arriving in month forty counts the same as one today, which it is not. Undiscounted LTV flatters long paybacks specifically.
Both are the standard conventions and both are used here, because a number computed differently to everyone else's cannot be compared to anyone else's. But they are a reason to trust a short payback over a large LTV when the two disagree.
How it works
- 1
Enter four numbers about one customer
Monthly revenue, monthly cost to serve, fully loaded acquisition cost, and monthly churn. Everything a unit economics calculator can tell you follows from those four. Use customer churn rather than revenue churn — mixing the two is the most common way these numbers come out wrong.
- 2
Read both columns, not one
Every figure is shown on gross profit and on revenue. The revenue column is what most calculators report by itself, and it is always the flattering one — inflated by exactly your gross margin, which is why an 80%-margin business sees its LTV overstated by a quarter.
- 3
Then read the lever table
If the ratio is under 3×, this is the part that matters. Each of the four inputs is solved backwards to show what it would have to reach on its own — and any lever that cannot reach the target at any value is marked rather than left for you to discover in a quarter's time.
Frequently asked questions
- What are unit economics?
- What one customer earns and costs across their whole relationship with you, rather than what the whole business does in a quarter. In a subscription business the unit is a customer; in ecommerce it is usually an order. The point of measuring it is that a company with bad unit economics grows into a larger loss, not out of one.
- How do you calculate unit economics for SaaS?
- Subtract cost to serve from monthly revenue to get contribution per customer, divide by monthly churn to get lifetime value, then divide that by acquisition cost. At $100 revenue, $20 to serve, 3% churn and $1,200 CAC, that is $80 a month over 33 months, or $2,667 of LTV against $1,200 — a ratio of 2.2×.
- Should LTV use revenue or gross profit?
- Gross profit. Revenue-based LTV counts money that leaves again as hosting, support and payment fees, and the overstatement is exactly your gross margin — 25% on an 80% margin. It is the single most common error in this arithmetic, and it is popular because it makes the ratio look better.
- What is a good LTV:CAC ratio?
- Three times is the conventional bar and it is a convention rather than a law. Below 1× a customer never repays what they cost. Between 1× and 3× the business works but growth consumes cash faster than it returns it. Above 5× the usual reading is under-investment — you could be spending more to acquire and are not.
- Which lever should I pull if my ratio is too low?
- Whichever needs the smallest move, and this unit economics calculator solves for that directly. On the worked example the answer is a tie: churn down 26% or CAC down 26%, both ahead of a 28% price rise. That tie is structural, since the ratio is inversely proportional to both — a percentage off churn and the same percentage off CAC are worth precisely the same.
- Why is cutting cost to serve sometimes marked as not reachable?
- Because it bottoms out at zero. On the default numbers a 3× ratio needs $108 of monthly gross profit from a customer paying $100, which is not available however cheap the infrastructure gets. Free service still leaves the ratio short. That is worth seeing before an engineering quarter is spent on it.
- What is CAC payback and how long should it be?
- The months of gross profit needed to recover acquisition cost. Twelve months is the usual comfortable figure for B2B SaaS and under six is strong. It is worth reading separately from the ratio a unit economics calculator reports, because payback is about cash timing — a business can have a healthy ratio and still run out of money waiting for it.
- Is a unit economics calculator excel template better?
- For a one-off, a unit economics calculator excel sheet is perfectly adequate — the arithmetic is four divisions. What a spreadsheet rarely does is invert the formula to solve each lever backwards, because that means four more formulas nobody writes until they already know they need them.
- How is monthly churn turned into a customer lifetime?
- Lifetime in months is one divided by the monthly churn rate, so 3% churn implies a 33-month average life. It assumes churn stays flat forever, which real cohorts do not — they churn hardest in the first months and then settle, meaning this convention tends to understate your long-lived customers.
- Should I discount future revenue?
- Strictly yes, and almost nobody does. A dollar arriving in month forty is worth less than one today, so undiscounted LTV overstates long-lived customers. The convention here is undiscounted because it is what everyone quotes and comparisons only work if the method matches — but it is a reason to prefer short payback over large LTV.
- What should be included in CAC?
- All sales and marketing costs divided by customers acquired in the same period — including salaries, not just ad spend. Excluding people is how a $1,200 CAC gets reported as $400, and it makes every downstream figure wrong in the same direction. Fully loaded is the only version worth calculating.
- Does this work for ecommerce?
- Partly. A unit economics calculator online for ecommerce usually models a single order — product cost, shipping, fees, ad spend — rather than a recurring relationship, so the churn input has no natural meaning. This one is built for subscriptions; for repeat-purchase retail, treat the monthly figures as per-order and the results as rough. A dedicated unit economics calculator online for ecommerce will fit better.
- Do you store the numbers I enter?
- No. The calculation runs entirely in your browser. Nothing is sent to a server, nothing is logged, and there is no account — worth knowing before you type your real CAC into a web page.
- Why is this free, and what is Tekk?
- Tekk is a spec-driven development platform for people building software with AI coding agents. This calculator costs us nothing to run, and unit economics improve when the product improves faster than the spend does. No signup, no run limit, no upsell inside the tool.
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