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Unit economics: is each customer profitable?

Build the math of a typical customer: how much they pay, how much it costs to serve them and how much it cost to win them. See contribution margin per order, lifetime profit per customer, how many months CAC takes to pay back and how much you can spend to acquire customers.

Educational simulation. Not investment advice. Results are estimates based on the data you enter and do not replace advice from a qualified professional.

Reviewed on Oct 31, 2026

A typical customer

Example: a coffee subscription e-commerce. It also works for apps, marketplaces and services.

Revenue
Variable costs per order
Acquisition and retention

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—Lifetime profit per customer (LTV − CAC)
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Where each order’s money goes

From order value to contribution margin: what is left to pay for CAC and fixed costs.

Tap the chart to see the values.

Cumulative profit per acquired customer

Starts negative because of CAC and rises with each month’s margin, already adjusted for the chance that the customer cancels.

Tap the chart to see the values.

LTV ÷ CAC by order value and churn

Rows: average order value. Columns: monthly churn. Green from 3×. The outlined cell is your scenario.

Per-order and per-customer math

The summary lists your inputs, results, formulas, assumptions and sources. The full report also includes the charts and interpretations, in color. In the print dialog, choose Save as PDF.

Method, assumptions and sources

Formulas

Contribution margin per order = order value − taxes − product cost − payment fee − shipping and packaging − support
Average lifetime = 1 ÷ monthly churn; LTV = margin per order × orders per month × average lifetime
Payback = CAC ÷ monthly margin; maximum CAC = LTV ÷ 3
Break-even order value = (shipping + support + CAC ÷ (orders per month × lifetime)) ÷ (1 − taxes − product cost − fee)

Assumptions and limits

  • Educational simulation. It uses contribution margin, not revenue, because margin is what pays back CAC. The cumulative profit chart applies churn month by month.
  • It does not include fixed costs or the time value of money. Taxes on sales vary by country and product.

Official sources and references

  • David Skok, SaaS Metrics 2.0 (LTV, CAC and payback)
  • Horngren, Datar & Rajan. Cost Accounting: A Managerial Emphasis (contribution margin). Pearson.

Frequently asked questions

What is unit economics?

The analysis of revenue, costs and margin of one unit of the business, such as a customer or an order, including the cost of acquiring it.

How do I read the default example?

A $120 order leaves $35.60 of contribution margin. With 8% monthly churn, the customer stays 12.5 months and generates $445 of margin; minus the $130 CAC, $315 is left per customer. LTV ÷ CAC of 3.4× is healthy and CAC pays back in 3.7 months.

How do I calculate LTV?

Monthly contribution margin per customer times the average customer lifetime, which is 1 divided by the monthly churn rate.

Why should LTV use margin and not revenue?

Because margin is what is left to pay for acquisition and fixed costs. Using revenue overstates what a customer is worth.

What is an acceptable maximum CAC?

A common reference is LTV ÷ 3, to keep LTV ÷ CAC at 3 times or more. In the example that is about $148.

Where do I get CAC and churn?

CAC is everything spent to win customers in the month (ads, agencies, tools, sales salaries and commissions) divided by new customers. Churn is the share of customers active at the start of the month who stopped buying. Use an average of several months.

What are the limits of this math?

It leaves out fixed costs and the time value of money and assumes constant churn, while churn is usually higher in the first months. Taxes vary by country and product; check rates with your accountant.

Related calculators

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Unit economics: how to tell whether each customer is profitable

Unit economics is the math of one unit of the business, usually a customer or an order: how much revenue it brings, how much it costs to serve and how much it cost to win. If each unit loses money, growth only grows the loss, no matter how fast revenue rises.

Contribution margin per order

Margin = order value − taxes − product cost − payment fee − shipping and packaging − support. In the calculator’s example, a $120 order leaves $35.60 of margin, or 30% of the order.

The example uses the calculator’s default values; replace them with your own.

LTV, CAC and payback

  • Average customer lifetime = 1 ÷ monthly churn rate. At 8% a month, 12.5 months.
  • LTV = monthly margin per customer × average lifetime. In the example, $445.
  • LTV ÷ CAC: with a $130 CAC, 3.4 times.
  • Payback = CAC ÷ monthly margin: about 3.7 months.

LTV uses margin, not revenue, because margin is what pays back CAC and fixed costs.

Maximum CAC

To keep LTV ÷ CAC at 3 or more, the maximum CAC is LTV ÷ 3. That is the reference number for marketing: above it, each new customer brings little return.

What improves the math most

Reducing churn usually has more effect than raising prices, because it extends the life of every customer. Increasing purchase frequency and average order value also helps. The calculator’s heat map shows LTV ÷ CAC for combinations of order value and churn.