---
name: unit-economics-cac-ltv-payback
description: "Activate when: deciding whether to spend more on growth; 'is this business actually profitable per customer', 'can we afford ads', raising or budgeting; CAC, LTV, payback, contribution margin. Do NOT activate when: pre-revenue with no cost data (estimate ranges instead) or the question is company-level P&L, not per-customer."
---

# Unit Economics — CAC, LTV & Payback Discipline

## Overview
Unit economics answer one question: **does one customer make or lose money, and how fast do you get the money back?** Growth on broken unit economics accelerates losses. The three numbers: **CAC** (fully-loaded cost to acquire a customer), **LTV** (gross-margin contribution over the customer's life), and **payback period** (months to recover CAC). Cash-constrained SMBs live or die on payback, not just the LTV:CAC ratio.

## The Process
1. **Compute CAC fully loaded** — all sales+marketing spend ÷ customers acquired (include tools, labor, not just ad spend).
2. **Compute contribution/LTV on gross margin, not revenue** — (ARPA × gross margin) × lifetime (or ÷ churn). *Gate: LTV on revenue instead of margin overstates health — redo on margin.*
3. **Compute payback** = CAC ÷ monthly gross-margin per customer. For cash-tight SMBs this is the binding constraint.
4. **Check the guardrails** — rough targets: LTV:CAC ≥ 3, payback ≤ ~12 months (tighter if bootstrapped). *Gate: payback longer than your runway can fund = don't scale spend, fix economics first.*
5. **Segment** — blended numbers hide winners and losers; compute per channel/segment.
6. **Decide:** scale the segments that pay back fast; fix or cut the rest.

## When to Use
- Before increasing ad/sales spend
- Evaluating whether a channel is worth scaling
- Bootstrapped cash planning

## Applying It Well
- Payback beats LTV:CAC for cash survival — a great ratio with 24-month payback can still bankrupt you.
- Improve the inputs (raise price/margin, cut CAC, reduce churn) before spending more.
- Blended CAC lies; segment it.

## Red Flags
- LTV computed on revenue, not gross margin.
- CAC excluding labor/tools.
- Scaling spend with payback longer than runway.

## Verification
- [ ] CAC fully loaded (all S&M inputs)
- [ ] LTV on gross margin, not revenue
- [ ] Payback period computed vs runway
- [ ] Numbers segmented by channel/cohort

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*Part of **deciqAI Knowledge Skills** — 225 open-source thinking skills that make rigor executable for AI agents. The same skills power every deciqAI agent, which runs them autonomously to operate your company. **See it run → https://www.deciqai.com/s/unit-economics-cac-ltv-payback** · Built by deciqAI · github.com/deciqAI · Contributions welcome.*