Subscription CAC Payback + Unit Economics

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A B2C subscription business that bills 12–24 months upfront? Every CFO’s dream. 💰📆

You’ve got a cash conversion engine that spits out working capital on Day 1. Customer Acquisition Cost (CAC) is paid back immediately. LTV/CAC looks great on paper. But don’t be fooled — averages lie, and marketing efficiency can be dangerously overstated if you’re not looking under the hood. 🚨📉

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Here’s what I tell my team: ignore vanity metrics. Dig into the economics of one subscriber. Not the average, the actual.

There are two lenses that matter:

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1. Accounting View
Spread revenue over time to align with cost delivery. Monthly contribution margin. Track CAC payback and LTV not just in aggregate, but by cohort. It’ll keep your P&L honest. 🧾📊

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2. Cashflow View (my favorite)
Map the actual lifecycle of cash: CAC upfront, revenue upfront, service costs over time. Model the probability of each outcome based on churn behavior. You’ll get a range of outcomes instead of a single LTV number — which is much closer to reality. 💸🔁

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If you really want to stress test the system, discount those cashflows and look at the distribution. Don’t just ask “what’s the average CAC payback?” Ask: “what’s the modal customer path — and how many follow it?” 🎯📈

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Especially in M&A, this is where diligence makes or breaks a deal. Aggressive sellers will spend big on customer acquisition, book revenue upfront, and hand you the retention risk. That’s not growth — that’s a time bomb. ⏳💥

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Cohort analysis. CAC by channel. Churn by segment. That's the work. Do it, and you’ll value businesses others misprice.

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🔍💼📉 #CFOlife #SaaS #SubscriptionEconomics #PrivateEquity #UnitEconomics #M&A #FinancialDiscipline #MarketingEfficiency