Category — 03

Unit economics. Does the math actually work?

Unit economics is where investors live. Growth metrics tell them you're getting bigger. Retention tells them you're not leaking. Unit economics tells them whether the engine is profitable — or whether you're paying a dollar to make ninety cents and calling it growth.

The ten metrics

Ten numbers your investor will ask about first.

Customer Acquisition Cost

CAC

The fully-loaded cost of landing a new customer. Sales, marketing, the SDR team, the tools, the events. Most operators undercount it by half — and the board eventually makes them compute the honest version.

Read the guide →

CAC Payback Period

Months

How many months of gross-margin-adjusted revenue it takes to earn back what you spent acquiring a customer. The metric a board grills you on harder than CAC itself — and the lever you actually have lives in the numerator.

Read the guide →

Lifetime Value

LTV

The total gross profit you expect from a customer over their tenure. Sensitive to churn assumptions in ways most LTV models hide — and the number you can quietly hide a churn problem behind.

Read the guide →

LTV:CAC Ratio

3:1 / 5:1

The investor's favorite shortcut for "does this business work." A clean 3:1 proves the acquisition engine is efficient — but it says nothing about whether the business is actually growing.

Read the guide →

Magic Number

S&M efficiency

New ARR added in a quarter, divided by sales and marketing spend the prior quarter. The board's read on whether the GTM engine is paying for itself — and usually the same signal payback already gave you.

Read the guide →

Rule of 40

Growth + Margin

Annual growth rate plus profit margin. The company-level balance test — but a 40 isn't a 40: how you got there (proven profit vs. unproven growth) matters more than that you got there.

Read the guide →

Burn Multiple

Burn / Net New ARR

Total cash burned per dollar of net new ARR — the whole-company efficiency test, harsher than Magic Number. A pure venture metric: if you're profitable, you don't have one, and that's the point. Read it as a survival clock.

Read the guide →

Burn Rate

$ / month

Cash out the door each month — gross (what you spend) or net (spend minus revenue). The operational number you watch monthly, not a board ratio. The danger is the trajectory, not the level.

Read the guide →

Runway

Months left

Cash on hand divided by net burn. The real question isn't how many months — it's default alive or default dead. The clock that decides whether you raise from strength or beg from weakness.

Read the guide →

Quick Ratio

Growth efficiency

New + expansion MRR divided by churn + contraction MRR — the cleanest read on growth quality. But it's built from the same four components as Net New MRR, so for most operators it's a summary, not a new signal.

Read the guide →

How these connect

CAC and LTV are the unit. Rule of 40 and Burn Multiple are the system.

Unit economics splits into two layers. There's the per-customer math — what does it cost to acquire one customer and what are they worth? That's CAC, LTV, payback, and the ratio between them. And there's the company-level math — given how that unit math compounds, is the whole engine healthy? That's where Rule of 40, Magic Number, and Burn Multiple live.

CAC, CAC Payback, LTV, and LTV:CAC are a single conversation. You can't optimize one without affecting the others. Lower CAC by spending less on marketing and you'll likely see win rate drop, sales cycle stretch, and ACV shrink — which lengthens payback and lowers LTV. They move together. Track them together.

Magic Number and Burn Multiple ask whether growth is paying for itself — at two different scopes. Magic Number is the old-guard, sales-and-marketing-only measure. Burn Multiple is the new-guard, whole-company version: every dollar the company burns, not just the GTM line. Magic Number is operational; Burn Multiple is existential, and when the two disagree, the gap is where hidden burn lives. One honest caveat: Burn Multiple is a pure venture metric — a profitable, bootstrapped company has negative burn and no multiple at all, which is the goal, not a gap.

Rule of 40 is the synthesis. It captures the balance between growth and profitability — and forces profit onto the same line as growth, instead of letting growth get celebrated alone. But the sum is only half the read: a 40 built on proven profit is a stronger business than a 40 built on unproven growth. The genuinely dangerous zone isn't "below 40" — plenty of durable, profitable companies live there — it's slow growth and thin margin at the same time.

Burn Rate, Runway, and Quick Ratio are the survival metrics. Everything else can be theoretically healthy and you still go out of business if cash runs out. Runway under 12 months changes how you should read every other metric in this category. Under 6 months, none of the others matter.

Every founder I know who got into trouble with unit economics did the same thing: they looked at their CAC and their LTV separately, convinced themselves both were fine, and never multiplied the new-customer count by the cash gap between them. Payback period is what catches you.

Other categories