Visualising unit economics: what one customer is actually worth
Unit economics get presented as ratios, and ratios are easy to argue with because everyone computes them differently. A flow diagram of a single customer forces every component into the open.
Model one customer, not the company
Take average revenue per customer over their lifetime as the entering flow. Split it into acquisition cost, cost to serve, support, payment fees and what remains as contribution. Suddenly the LTV to CAC ratio is a picture rather than a claim.
Show the lifetime assumption
Lifetime value depends entirely on assumed lifetime, and that assumption is usually generous. Put the number in the chart title — thirty-month assumed lifetime — so nobody has to ask.
Separate blended from paid CAC
Blended CAC includes customers who arrived organically and makes acquisition look cheap. If you are deciding whether to spend more on ads, only paid CAC is relevant.
Payback belongs next to it
A healthy LTV to CAC ratio with a twenty-month payback still kills a company that cannot fund twenty months. Put payback months beside the flow chart, always.
- Revenue per customer as the entering flow.
- Acquisition, delivery, support and fees as outflows.
- Assumed lifetime stated in the title.
- Payback months shown alongside.
The diagram is uncomfortable the first time you draw it honestly. That discomfort is the value.
Frequently asked
What is a good LTV to CAC ratio?
Three to one is the common benchmark, but it is meaningless without the payback period and the assumed lifetime behind the LTV figure.
Should I use blended or paid CAC?
Paid CAC for decisions about spending more on acquisition. Blended CAC only describes what happened overall and flatters channels that did no work.