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Vivek Joshi

Director & CEO @ Exc... • 3m

Mastering Unit Economics Unit economics isn’t just a metric—it’s your startup’s financial DNA. It reveals whether each customer adds value or drains cash. Here’s how to build your unit economics from scratch: 1. Define Your Economic Unit What drives revenue? A customer, order, or subscription? Be clear—it’s the foundation. 2. Calculate CAC (Customer Acquisition Cost) Total sales & marketing spend ÷ number of new customers acquired in a given period. 3. Estimate Gross Margin per Unit Revenue per unit – variable costs (e.g., hosting, delivery, support). 4. Project Customer Lifetime Value (LTV) LTV = ARPU × Gross Margin % × Average Customer Lifespan. 5. Find Contribution Margin Contribution margin = Revenue – Variable Costs (per unit). This tells you if each sale helps cover fixed costs. 6. Calculate CAC Payback Period CAC ÷ monthly contribution margin per customer = months to break even. 7. Validate the LTV:CAC Ratio A healthy startup aims for LTV:CAC > 3 and payback in <12 months

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