Karthik Menon

Sanity-Check Your Unit Economics With a Simple Table

Check CAC, LTV, LTV:CAC and payback from your own numbers in a clear table, spot inconsistent inputs and find the lever that matters most.

At a glance

Best for: Founders of subscription and e-commerce businesses about to increase ad spend, raise money or set a budget for next quarter.
Tested on: Claude · Opus 5.5
You fill in: businessnumbers
You get: The table Metric Value Source Price per box £18.00 given Cost per box £10.20 given Payment fees (2.5% x £18) £0.45 calculated Gross margin /… (full result below)

Prompt

Sanity-check the unit economics of my business. I want arithmetic I can follow, not a lecture.

Business: {{business}}
Numbers I have (monthly unless stated): {{numbers}}

Steps:

1. Put the numbers in a table: metric, value, source ("given" or "calculated"). Calculate gross margin per customer per month, CAC, monthly churn, average lifetime in months, LTV (based on gross margin, not revenue), LTV:CAC and CAC payback in months. Show each formula once.

1. Say which numbers look implausible or inconsistent with each other, and why.

1. Name the single lever with the biggest effect on LTV:CAC. Show the key rows again with that lever improved by a realistic amount (state the amount), and compare it with one other lever.

1. Verdict in 2 sentences: does this business get better or worse as it spends more on acquisition?

If a number I need is missing or ambiguous, don't invent it. Tell me which one, and show the result under a low and a high assumption.

Fill in

{{business}}: What you sell, how and wheree.g. Specialty coffee subscription box, UK, sold via Instagram and Meta ads
{{numbers}}: Price, costs, ad spend, new customers, churn and promotionse.g. £18/box, £10.20 cost, £4,200 ads, 150 new, 108 of 900 cancelled

Example input

business: Subscription box of specialty coffee beans, UK, sold through Instagram and Meta ads.
numbers:
- Price £18 per box, one box a month
- Beans, packaging and postage per box: £10.20
- Payment fees: 2.5% of price
- Ad spend last month: £4,200
- New subscribers last month: 150
- Subscribers at start of month: 900; cancelled during the month: 108
- Every new subscriber gets their first box free (costs us the full £10.20)

1.1k0

Generated Outputs (1)

2 hours ago

Claude

Opus 5.5

2 hours ago

Generated Output

1. The table

| Metric | Value | Source |
|---|---|---|
| Price per box | £18.00 | given |
| Cost per box | £10.20 | given |
| Payment fees (2.5% x £18) | £0.45 | calculated |
| Gross margin / customer / month (price - cost - fees) | £7.35 (40.8%) | calculated |
| Ad CAC (£4,200 / 150) | £28.00 | calculated |
| Fully loaded CAC (ad CAC + free box £10.20) | £38.20 | calculated |
| Monthly churn (108 / 900) | 12% | calculated |
| Average lifetime (1 / churn) | 8.3 months | calculated |
| LTV (margin x lifetime) | £61.25 | calculated |
| LTV:CAC | 1.6 | calculated |
| CAC payback (CAC / margin) | 5.2 months | calculated |

2. What looks off

• The free box isn't just a cost; it's a filter you haven't measured. I don't know how many of the 150 cancel before their first paid box. If they're counted as subscribers, CAC per paying customer is higher:

- if 90% convert: £5,730 / 135 = £42.44 CAC, and LTV:CAC is 1.4
- if 60% convert: £5,730 / 90 = £63.67 CAC, and LTV:CAC is 0.96, so you lose money on every customer.

• 12% churn is measured on existing subscribers, who have already survived the free-box stage. Subscription boxes usually lose the most people in months 1-3, so real lifetime for a new customer is probably shorter than 8.3 months.

3. Biggest lever: churn

| Lever | Change | LTV | LTV:CAC |
|---|---|---|---|
| Today | - | £61.25 | 1.6 |
| Churn 12% to 8% (e.g. a pause or skip-a-month option) | lifetime 12.5 months | £91.88 | 2.4 |
| Price £18 to £20 | margin £9.30 | £77.50 | 2.0 |

A 4-point churn drop beats a £2 price rise, and it doesn't risk hurting conversion.

4. Verdict
At 1.6:1 with a 5-month payback, and possibly below 1:1 once free-box drop-outs are counted, extra ad spend makes this business worse, not better. Measure conversion from free box to paid and work on retention before you scale spend.

Why it works

"Based on gross margin, not revenue" blocks the most flattering and most common LTV mistake. The given/calculated source column makes it obvious which figures are yours and which are derived, so errors are easy to trace. Asking for inconsistencies between numbers catches problems like a free-trial promotion that isn't in CAC. The low/high rule for missing data means the answer shows a range instead of inventing a precise figure. Comparing two levers shows where to act, not just whether the numbers are good.

When not to use it

The simple lifetime = 1 / churn formula assumes churn is constant, which is rarely true in the first few months, so use cohort retention curves once you have them. Not suited to marketplaces, usage-based pricing or businesses with large one-off sales; those need a different model. For fundraising, have an accountant check the figures.

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