---
name: Unit Economics
description: Profitability per unit, before scale.
---
# Unit Economics

Unit economics asks: does each customer (or unit) generate more value than they cost to acquire and serve? If no, scale makes it worse, not better.

## Key metrics
- **CAC** — customer acquisition cost. Total sales+marketing spend / new customers acquired.
- **LTV** — lifetime value. ARPU × gross margin × (1 / churn rate).
- **LTV:CAC ratio.** <1 means you lose money on every customer. 3+ is healthy. <3 and growth burns cash.
- **Payback period.** Months to recover CAC. Long payback = cash-hungry growth.

## Use
- Negative unit economics plus "we'll fix it at scale" rarely gets fixed. Fix it small, then scale.
- Segment by cohort. Blended LTV:CAC can hide a profitable segment propping up a losing one.