Lesson content
Scroll through numbered sections or jump via the outline.
What you'll take away
- Build a one-row spreadsheet: price, COGS, CAC, churn → LTV and payback.
- Separate India GST in/out from 'revenue' line.
- Review last 20 customers — which segment has best contribution margin? Double down there.
The one question unit economics answers
Do you make money on each customer or order after direct costs? If not, scale makes losses worse, not better.
Unit economics turns vague 'we'll monetise later' into measurable contribution margin per user, order, or contract.
Core metrics (define yours clearly)
ARPU / ACV: average revenue per user or account per month or year.
COGS: direct costs — hosting, payment gateway fees, delivery, customer support tied to delivery, inventory.
Contribution margin = Revenue − COGS (per unit).
CAC: sales + marketing spend to acquire one paying customer.
LTV: contribution margin × average customer lifetime (months) − retention curve matters.
India-specific cost lines founders miss
- Payment gateway ~1.5–2% + GST on digital payments.
- Cash-on-delivery returns and RTO in e-commerce (can destroy margin).
- GST output tax vs input credit timing — cash flow, not just P&L.
- Inside sales salaries + commissions in B2B — fully loaded CAC.
- UPI is cheap for users, but business still bears infrastructure and reconciliation cost.
Worked mindset example
SaaS: ₹999/month plan, ₹150 hosting + support COGS → ₹849 contribution. CAC ₹3,000 → payback ~3.5 months if churn is low.
If monthly churn is 8%, average life ~12 months → LTV ≈ ₹10k — still healthy if CAC stays ₹3k.
Change one assumption (churn 15%) and LTV halves — sensitivity tables prevent fantasy forecasts.
Action items this week
- Build a one-row spreadsheet: price, COGS, CAC, churn → LTV and payback.
- Separate India GST in/out from 'revenue' line.
- Review last 20 customers — which segment has best contribution margin? Double down there.