Unit economics: what a customer is worth

Every budget question is the same question

"Can we afford ads?" "Is €300 for a landing page worth it?" "Should I discount?" Every one of these reduces to a number most SME owners have never written down: what a customer is worth to you.

Not knowing it causes two diseases. The rarer one is overspending. The common one is being too scared to spend anything — turning down a €50 cost to acquire a €270 patient because €50 feels like a lot.

A word before the numbers start. The maths in this lesson is multiplication and one division. If you can split a restaurant bill three ways, you can do all of it. We'll take one number at a time, show every line of working, and use rounded figures throughout — because these are planning numbers, not accounting, and a rough number written down beats a precise number you never worked out.

Number one: revenue per customer

Start with what a customer pays you, in the unit they actually pay in.

• E-commerce: average order value, times orders per customer. Ostara's AOV is €78.
• Services: the average job or treatment episode. Herzog's patients average 4.2 sessions at €65.
• Subscriptions: the monthly fee, times months they stay. Storkflow charges €89/month.

Number two: gross margin — the one people skip

You do not get to spend revenue. Delivering the thing costs money — clay, glaze and postage at Ostara; therapist hours at Herzog; hosting and support at Storkflow. What's left after those direct costs is your gross margin, and marketing is paid for out of margin, not revenue.

Ostara's margin is 58%. So a €78 order puts €78 × 0.58 = €45.24 on the table — not €78. Forget this and every "profitable" campaign you ever run will quietly lose money.

Tomas, in three lines

Herzog Physio is the gentlest case, so it goes first.

€65 per session × 4.2 sessions      = €273  revenue per patient
€273 × 0.70 gross margin            = €191  customer lifetime value

Two honest footnotes. The 70% margin is Tomas's estimate, flagged as such. And we've ignored the €80 first assessment, which keeps the number slightly conservative — the right direction to be wrong in. Note that €273 matches the "roughly €270" Tomas already quotes; when your shortcut lands on the number the owner recognises, you're probably close enough.

So: a new patient is worth about €191 to Herzog. Hold that thought.

Ana, with one honest assumption

Ostara customers can come back, so we need orders per customer — a number Ana doesn't have directly. What she has is Shopify's returning-customer rate: 19%.

Make the assumption visible: say each returning customer places one extra order. Then out of 100 customers:

81 customers × 1 order + 19 × 2 orders = 119 orders per 100 customers
                                       ≈ 1.2 orders per customer
€78 × 1.2                              = €93.60  revenue per customer
€93.60 × 0.58 gross margin             = €54.29  → call it €54 CLV

That's it. One flagged assumption, three lines, and Ana knows a customer is worth about €54 — before shipping she doesn't recharge, so the true figure is a little lower still. You'll see in a moment why this small number matters so much.

Lena, and what a subscription changes

A subscription is just many small purchases on a schedule, so the shape is the same:

€89/month × 14 months average lifetime = €1,246  revenue per customer
€1,246 × 0.82 gross margin             = €1,022  → call it €1,020 CLV

One wrinkle worth seeing, because you will meet it in your own numbers: two of Lena's figures disagree. A churn rate of 2.4%/month would imply an average lifetime of 1 ÷ 0.024 ≈ 42 months — but her records show customers actually average 14. Partly that's because Storkflow is young and most customers haven't had time to stay long. When two numbers disagree, plan on the worse one and write down why. Module 10 settles arguments like this properly.

So the cast so far: a Herzog patient ≈ €191, an Ostara customer ≈ €54, a Storkflow firm ≈ €1,020. Three businesses, a nineteen-fold spread — which is why borrowed marketing advice transfers so badly.

What you currently pay for a customer

Customer acquisition cost (CAC) = marketing spend in a period ÷ new customers in that period. Count money and honestly-costed time.

Storkflow spends €600/month and lands 9 new firms: 600 ÷ 9 ≈ €67 per customer — an underestimate, since it excludes the trade show and Lena's ~26 hours a month. An honest label ("€67, excluding time") beats a fake-precise €112.

Break-even CAC and the 3:1 habit

Break-even CAC is just CLV. Spend €191 acquiring a Herzog patient and the patient repays exactly €191 of margin: nothing gained, nothing lost. Spend more and marketing destroys money.

Break-even is therefore a ceiling, never a target. The working habit — a convention from subscription businesses, not a law of nature — is CLV ≥ 3 × CAC: aim to spend at most a third of a customer's value acquiring them, leaving room for profit, overheads, and the fact that your CLV is an estimate.

Herzog:     €191 ÷ 3 ≈ €64  target CAC
Ostara:     €54  ÷ 3 = €18  target CAC
Storkflow:  €1,020 ÷ 3 = €340  target CAC

Watch decisions fall out of these. Tomas's €150/month producing 3 patients would be a €50 CAC — under his €64 target, so that spend is defensible before it's even tried. Ana's €18 rules out most cold paid acquisition immediately, and points her back at organic and the email list — and it reframes that reported ROAS of 3.1, which is mostly retargeting claiming credit anyway. Lena's €340 makes even her €13 clicks look affordable, if they convert.

Payback: when the money comes back

CLV says whether a customer is worth acquiring. Payback says how long your cash is gone — and businesses die of cash, not of averages.

Herzog and Ostara are paid at the till, so payback is nearly immediate: an Ostara first order returns €45.24 of margin on the spot, meaning any CAC up to ~€45 is repaid at once — while a CAC between €45 and €54 waits on a second order that four customers in five never place.

Storkflow's cash returns as a drip: €89 × 0.82 = €73 of margin per month.

At the €340 target CAC:  340 ÷ 73 ≈ 4.7  → repaid in about 5 months
At break-even (€1,020):  1,020 ÷ 73 ≈ 14 → repaid in month 14 —
                          the last month of an average customer's life

That last line is why break-even is a ceiling. With thin reserves, prefer cheap-and-fast channels first even when an expensive one is "affordable in principle".

Write the rough number down

Every figure above carries an estimate somewhere — Tomas's margin, Ana's extra-order assumption, Lena's 14 months. That's fine. Label the estimates, do the arithmetic anyway, and notice how robust the decisions are: whether Ana's CLV is €40 or €70, a €200-per-customer channel is still out and her email list is still in. You'll revise the inputs in Module 10. You need the answer this quarter.

Your turn.

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