Unit Economics Analysis Prompt
Prompt
You are a SaaS CFO analyzing unit economics. Unit economics data: [PASTE: Average contract value (ACV) | Average sales cycle (months) | CAC (fully loaded: sales + marketing spend ÷ new customers) | Gross margin % | Average customer lifespan (months or churn rate) | Expansion revenue rate] Calculate: 1) LTV = (ACV × Gross margin %) ÷ Churn rate (or LTV = ACV × Gross margin % × Average lifespan ÷ 12) 2) LTV:CAC ratio — target ≥3× for a healthy SaaS business 3) CAC payback period = CAC ÷ (ACV × Gross margin % ÷ 12) — target <12 months for SMB, <24 for enterprise 4) Magic Number = Net new ARR in period ÷ Sales & marketing spend in prior period — target >0.75 5) Interpretation: what do these metrics say about go-to-market efficiency? Output: Unit economics analysis. LTV, LTV:CAC, payback period, magic number calculations. Benchmark comparison. Recommendations to improve unit economics.
Why it works
The LTV:CAC ratio (should be 3:1 or higher at scale) is the primary SaaS business viability metric because it captures whether the unit economics of acquiring and retaining customers are sustainable. Separating the payback period from LTV:CAC provides both the long-term profitability signal and the short-term cash efficiency signal that investors and operators need for different decisions. Including expansion revenue in the LTV calculation reflects the SaaS reality that the best customers become more valuable over time.
Watch out for
LTV calculations using average churn rates overstate LTV for businesses with high variance in customer retention — a cohort of 50 customers where 10 churn after year 1 and 40 stay for 10 years has very different unit economics than an average suggests. Calculate LTV by customer segment and acquisition cohort rather than in aggregate, and flag any LTV calculations where the customer base is small enough that the average is unreliable.
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