Unit Economics Calculator

# SKILL.md — Unit Economics Calculator

## Role
You are a startup CFO or product analyst. Calculate unit-level profitability to determine whether the business model works at scale.

## Instructions

### Step 1: Identify the Unit
The "unit" is the core transaction or customer that drives the business. Define it:
- SaaS: One customer/subscriber
- E-commerce: One order or one customer cohort
- Marketplace: One transaction (buyer + seller pair)
- Consumer app: One user / one daily active user
- Services: One engagement / one client

### Step 2: Revenue per Unit
Calculate all revenue generated from one unit over its lifetime:
```
SaaS Example:
  Monthly subscription: $[X]/month
  Upsell probability: [X]% chance of upgrading to $[X]/month in month [X]
  Average contract duration: [X] months

E-commerce Example:
  Average order value (AOV): $[X]
  Purchase frequency: [X] orders/year
  Average customer life: [X] years
  Total revenue per customer: $[X]
```

### Step 3: Variable Costs per Unit
Identify every cost that varies with each unit sold:
| Cost Category | $/Unit | Notes |
|-------------|--------|-------|
| COGS (product/service cost) | | |
| Payment processing (Stripe ~2.9%) | | |
| Customer support (per ticket × avg tickets) | | |
| Infrastructure / hosting (per customer) | | |
| Returns / refunds (% × AOV) | | |
| **Total Variable Cost per Unit** | **$[X]** | |

### Step 4: Contribution Margin
```
Revenue per Unit: $[X]
− Variable Costs per Unit: $[X]
= Contribution Margin per Unit: $[X]
Contribution Margin %: [X]%

Units needed to cover Fixed Costs:
  Fixed Costs (monthly): $[X]K
  Break-Even Units: Fixed Costs / CM per Unit = [X] units/month
```

### Step 5: Payback Period Calculation
```
Customer Acquisition Cost (CAC): $[X]
Monthly Contribution Margin per Customer: $[X]/month
Payback Period: CAC / Monthly CM = [X] months
```

**Interpretation:**
- < 12 months: Healthy; reinvest aggressively
- 12–24 months: Acceptable for enterprise; tight for SMB
- > 24 months: Cash drain; prioritize CAC reduction or gross margin improvement

### Step 6: Cohort Lifetime Value (LTV) Analysis
Track a cohort of customers over time to see when LTV exceeds CAC:

| Month | Customers Retained | Revenue | Variable Costs | Cumulative GM | Cumulative LTV vs CAC |
|-------|------------------|---------|---------------|--------------|----------------------|
| 0 | 100 | | | | ($[CAC]K) — negative |
| 3 | [X] | | | | |
| 6 | [X] | | | | |
| 12 | [X] | | | | |
| 24 | [X] | | | | = 0 (payback month) |
| 36 | [X] | | | | > 0 (profitable) |

**Plot the cohort curve**: At what month does the cumulative contribution margin cross zero (payback)?

### Step 7: Sensitivity Analysis
| Variable | Base Case | -20% | -10% | +10% | +20% |
|---------|----------|------|------|------|------|
| Price (AOV/ARPU) | | | | | |
| Gross Margin | | | | | |
| CAC | | | | | |
| Churn Rate | | | | | |
| **LTV/CAC** | [X]x | | | | |

Identify which variable most impacts unit economics — that's the key metric to manage.