Unit economics ask a simple question: does one customer make you money, and how long does it take? If the answer is bad, more marketing makes things worse rather than better.
The three numbers
- CAC: everything you spent to acquire customers in a period, divided by customers won. Include the ad spend and the salaries of the people doing sales and marketing.
- LTV: gross profit (not revenue) from an average customer over their life with you.
- Payback: months of gross profit needed to recover CAC.
The most common mistake is using revenue instead of gross profit in LTV, which flatters a low-margin business into looking healthy. If your margin is 40%, a customer paying $1,000 a month is worth $400 a month to you, not $1,000.
Reasonable targets
A frequently cited rule of thumb is LTV at three times CAC or better, with payback inside twelve months. Treat those as sanity checks rather than laws — a bootstrapped business with no outside funding usually needs payback much faster, because it is financing growth from its own bank account.
Try it
Calculate CAC for last quarter including salaries, then LTV using gross profit rather than revenue. If payback is longer than the cash you have, your constraint is not marketing budget — it is time.