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    Startup finance / Unit economics

    Unit economics calculator

    LTV, CAC payback, LTV/CAC and net revenue retention from five inputs, with the churn sensitivity that shows why retention beats acquisition. The ratios investors ask for, computed the same way every time.

    ARPA$800/moGross margin80%Rule of 40160
    LTV
    $32.0k
    40.0 months of ARPA
    LTV / CAC
    3.56×
    Above 3× is healthy
    Payback
    14.1 mo
    CAC $9.0k
    Net revenue retention
    83%
    98.5% monthly
    Unit economics
    Every ratio from the same five inputs.
    Unit economics
    MetricValueRead
    ARPA$800.00Monthly recurring revenue per customer
    Gross profit per customer$640.00After cost of service
    LTV$32.0kGross profit divided by monthly churn
    CAC payback14.1 monthsMonths of gross profit to recover CAC
    LTV / CAC3.56×Return on acquisition spend
    Monthly NRR98.50%Expansion less churn and contraction
    Annual NRR83.4%Monthly NRR compounded
    Rule of 40160.0Growth plus margin

    Healthy: LTV/CAC above 3 with payback inside 18 months.

    Inspect the model
    Choose a quick result view, a scaled comparison, or the complete diagnostic set.
    LTV against monthly churn
    Churn dominates: halving it doubles the lifetime value.
    LTV against monthly churn0.00028.6757.3486.02114.69143.360.5%0.5%1%1%1.5%1.5%2%2%3%3%4%4%5%5%7%7%10%10%LTV ($k)
    Canonical equations
    The exact relationships implemented by this engine.

    LTV = ARPA · gross margin / churn · A perpetuity on gross profit.

    CAC / (ARPA · gross margin) · Months, not years.

    (start + expansion − churn − contraction) / start · Monthly, then compounded.

    finance methodology

    A clear path from inputs to results.

    Unit economics is the test of whether growth is worth funding. LTV, CAC payback and net revenue retention answer it, and the churn curve shows why a point of retention is usually worth more than a point of acquisition.

    Step-by-step methodWorked exampleAssumptions explained

    How to use

    1. Enter MRR and customer count to get ARPA.
    2. Add gross margin, churn, expansion and CAC.
    3. Read LTV/CAC and payback, then check the churn sensitivity.

    The formula

    LTV=ARPA⋅GMchurn,payback=CACARPA⋅GMLTV = \frac{ARPA \cdot GM}{churn}, \qquad payback = \frac{CAC}{ARPA \cdot GM}

    Reference: Gross-profit LTV with constant churn, as the present value of a decaying perpetuity (Brealey, Myers & Allen, Principles of Corporate Finance).

    Worked example

    $120k MRR, 150 customers, 2% churn

    Inputs
    • ARPA $800, 80% margin, CAC $9,000.
    Calculation path
    1. 1

      Gross profit per customer $640/month. LTV = 640/0.02 = $32,000. Payback = 9,000/640 = 14.1 months. LTV/CAC = 3.6×.

    Result

    $32,000 LTV, 14 months payback, 3.6× return.

    Interpreting the result

    Above 3× with payback inside 18 months is fundable growth. Below 1× every sale destroys value, and more sales destroy it faster.

    Assumptions & limitations

    • Constant churn, not a cohort curve.
    • CAC fully loaded with sales and marketing cost.
    • Gross margin excludes sales and marketing.
    • NRR compounds monthly.

    Frequently asked questions

    Why is LTV gross-profit based?

    Because revenue that costs 60% to deliver is not worth the same as software margin.

    Should I use logo or revenue churn?

    Revenue churn for LTV; logo churn tells you about the sales motion.

    What is a good NRR?

    Above 100% means the base grows without new logos; 110–120% is strong for B2B SaaS.

    What is Rule of 40?

    Growth plus margin above 40 — a rough test of balancing speed against profitability.

    Methodology last reviewed 2026-10-22. Results are informational and not financial or engineering advice — see our disclaimer.