🎯 Goal: Compute the core per-customer metrics: CAC, contribution margin, LTV, payback and break-even — then use the LTV/CAC ≥ 3 rule to judge the model.
If every customer already loses money, selling more just kills you faster — growth only accelerates the loss. Unit economics examines profit/loss on a single customer unit. Four must-know concepts: CAC (cost to acquire 1 customer), contribution margin (what’s left per order after variable costs), LTV (total profit a customer brings over their lifetime), and payback (how long to recover CAC). The golden rule: LTV/CAC ≥ 3 means the model is healthy enough to scale. You’ll leave able to compute all of these with formulas and worked examples.
Lesson content
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Five core formulas: • CAC = total marketing & sales spend ÷ new customers. • Contribution margin/order = price − variable costs (cost of goods, delivery, payment fees). • LTV = contribution margin/order × number of purchases over a lifetime. • Payback = CAC ÷ contribution profit per period (≈ orders/month needed to recover CAC). • Break-even = total fixed cost ÷ contribution margin/order (orders to cover fixed costs). The deciding number is LTV/CAC: under 1 means you lose on each customer; ≥ 3 signals a healthy model with room to reinvest.
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A 5-step computation: 1) Add all acquisition spend in the period ÷ new customers → CAC. 2) Take price minus every variable cost per order → contribution margin. 3) Estimate lifetime purchases (from repeat rate) → multiply by margin → LTV. 4) Divide LTV/CAC and compare to the threshold of 3. 5) If short: either cut CAC (a cheaper channel), or raise LTV (upsell, more purchases). Tip: raising the repeat rate is usually cheaper and stronger than pouring money into ads for new customers.
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TOOL — Unit-economics worksheet (with example numbers). Fill your own numbers to see profit/loss.
Metric
How to compute
Example
CAC (cost/customer)
Marketing spend ÷ new customers
100,000đ
Contribution margin/order
Price − variable costs
70,000đ
Purchases/lifetime
Estimated from repeat rate
5 times
LTV
Margin × purchases (70,000 × 5)
350,000đ
LTV / CAC
350,000 ÷ 100,000 (target ≥ 3)
3.5 ✅
Payback
CAC ÷ margin/order (100,000 ÷ 70,000)
≈ 1.4 orders
Break-even (example): if fixed cost is 21,000,000đ/month and margin is 70,000đ/order → you need 21,000,000 ÷ 70,000 = 300 orders/month to break even. Above 300 orders, profit begins.
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Case study — Coolmate (step by step): 1) CAC issue: acquiring a new customer isn’t cheap (ads + content). 2) But over half of customers return → high lifetime purchases. 3) Contribution margin per order is positive thanks to in-house production and direct selling (D2C, no cut for middlemen). 4) Result: large LTV pulls LTV/CAC to a healthy level, so "just selling basics" still grows sustainably and raises capital. Lesson: retention (repeat) inflates LTV and is usually cheaper and more effective than endlessly running ads for new customers.
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5 unit-economics traps: • Forgetting hidden CAC costs: counting only ad spend, ignoring sales salaries and promos → a falsely low CAC. • Confusing revenue with contribution margin: not subtracting cost of goods/delivery/payment fees. • Inflating purchase count: assuming more repeat than reality → a fake LTV. • Ignoring payback: a pretty LTV/CAC but waiting 3 years to recover CAC still starves cash. • Scaling while LTV/CAC < 1: the more you spend to acquire, the faster you lose.
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Checklist for a healthy model: ① Does CAC include ALL acquisition costs (ads + salaries + promos)? ② Has contribution margin subtracted EVERY variable cost? ③ Are purchases estimated from real data, not wishful thinking? ④ Is LTV/CAC ≥ 3? ⑤ Is payback short enough to avoid running out of cash before recovery?
Practice exercise
🔬 APPLIED EXERCISE: For your product, estimate CAC, contribution margin per order, and lifetime purchases; then compute LTV, LTV/CAC and payback. If the ratio is under 3, write 2 fixes (cut CAC via a cheaper channel, or raise LTV via upsell/higher repeat) and recompute.
Worked template: FILLED EXAMPLE: CAC 120,000đ; contribution margin 60,000đ/order; customer buys 4 times → LTV = 240,000đ; LTV/CAC = 2.0 (below target). Payback = 120,000 ÷ 60,000 = 2 orders. Fixes: raise purchases to 6 (LTV 360,000đ → ratio 3.0) OR cut CAC to 80,000đ (ratio 3.0).
Quick quiz
1. What is CAC?
→ The average cost to acquire 1 new customer
CAC is the average cost to acquire 1 new customer, not revenue or monthly profit.
2. What is the golden rule of unit economics, and at what threshold?
→ LTV/CAC ≥ 3
The golden rule is LTV/CAC ≥ 3 — the model is healthy enough to grow with room to reinvest.
3. If LTV/CAC < 1, what is happening?
→ Each customer loses money — selling more loses money faster
LTV/CAC < 1 means each customer loses money, and selling more loses money faster.
4. Why does Coolmate have a high LTV?
→ Because over half of customers return and buy many times, lengthening the lifetime
Coolmate has high LTV because over half of customers return and buy many times, lengthening the lifetime.
5. CAC = 120,000đ, contribution margin 60,000đ/order, customer buys 4 times. What are LTV and LTV/CAC?
→ LTV 240,000đ; LTV/CAC = 2.0 (below the threshold of 3)
LTV = 60,000 × 4 = 240,000đ; LTV/CAC = 240,000 ÷ 120,000 = 2.0, below the threshold of 3.
6. Fixed cost 21,000,000đ/month, contribution margin 70,000đ/order. How many orders/month to break even?
At an advanced level, distinguish contribution margin (price − variable cost, per order) from net profit (after fixed costs too). Healthy unit economics at the order level (positive margin, LTV/CAC ≥ 3) is NECESSARY, but for the whole company to profit, total contribution must exceed total fixed cost.
Payback is a cash-flow metric, not just profit/loss: LTV/CAC = 3 but if it takes 24 months to recover CAC, you still need a lot of capital to "hang on". Healthy startups often want payback under 12 months so cash recycles fast.
From one order to the whole company
Contribution margin/order
50,000đ
Orders/month
1,000 orders → total margin 50M
Fixed cost/month
40M (rent, wages)
Company profit
50 − 40 = +10M/month
Positive margin per order isn’t enough; you need enough orders for total margin to beat fixed cost before the company profits.
Common trap: “Nice LTV/CAC but out of cash”: a ratio of 3+ looks healthy, yet if payback is too long (e.g. 24–36 months) cash is buried in acquiring customers, and the company can die from running out of cash before customers pay it back. Always read LTV/CAC ALONGSIDE payback.
Advanced questions
1. A shop has CAC = 150,000đ, contribution margin 50,000đ/order, and a customer buys on average 4 times. Compute LTV and LTV/CAC, then conclude.
→ LTV = 200k, LTV/CAC ≈ 1.33 → below 3, the model is still weak
LTV = 50,000 × 4 = 200,000đ. LTV/CAC = 200,000 ÷ 150,000 ≈ 1.33, below the threshold of 3 → each customer is profitable but thin, not healthy enough to scale; raise purchases or cut CAC.
2. Same shop (CAC 150k, margin 50k/order). How many ORDERS to reach payback of CAC, and how many purchases to hit LTV/CAC = 3?
→ Payback after 3 orders (150k÷50k); 9 purchases to make LTV = 450k → LTV/CAC = 3
Payback = CAC ÷ margin per order = 150,000 ÷ 50,000 = 3 orders. For LTV/CAC = 3 you need LTV = 3 × 150,000 = 450,000đ; at 50k/order that’s 450,000 ÷ 50,000 = 9 purchases.
3. Why can "LTV/CAC = 3" still be dangerous if payback is ignored?
→ Because if payback is too long (e.g. 24 months), cash is buried in acquisition and the company may run out of cash before recovery
LTV/CAC is a long-run profit/loss metric; payback is a short-run cash metric. A nice ratio but overly long payback means capital is tied up for long; the company can die from running out of cash even though each customer is "theoretically" profitable.
🎯 Real-life mission
REAL-LIFE MISSION: Compute real unit economics for your product — estimate CAC, contribution margin per order, and lifetime purchases; then calculate LTV, LTV/CAC, payback and break-even. If LTV/CAC < 3, propose 2 concrete actions (cut CAC via a cheaper channel OR raise LTV via upsell/higher repeat) and recompute to see if it reaches 3.