Profitability Cohort Margin & LTV Analyzer
Analyze customer cohort profitability, calculate lifetime value, payback periods, and LTV:CAC ratios.
Worked Examples
Example 1: SaaS Cohort LTV Analysis
Problem:1,000 customers acquired at $50 CAC. Monthly subscription $100, 60% margin, 90% monthly retention, 100% pay monthly (subscription model). Calculate LTV and payback.
Solution:Subscription Model:\n- Cohort: 1,000 customers\n- CAC: $50/customer\n- Monthly fee: $100\n- Margin: 60%\n- Monthly profit/customer: $60\n- Monthly retention: 90%\n\nMonth-by-Month:\nM1: 1,000 × $100 × 60% = $60,000 profit\nM2: 900 × $100 × 60% = $54,000\nM3: 810 × $100 × 60% = $48,600\n...\nM12: 1,000 × 0.9^12 = 282 × $60 = $16,920\n\nCumulative:\n- M12 cumulative profit: ~$465K\n- Per customer: $465\n- CAC: $50\n- Net profit/customer: $415\n- LTV:CAC: $465 / $50 = 9.3:1 (excellent)\n\nPayback Period:\n- Profit/month: $60\n- CAC: $50\n- Payback: $50 / $60 < 1 month (immediate)\n\n24-Month LTV:\n- Retention at M24: 0.9^24 = 10%\n- Cumulative: ~$650/customer\n- LTV:CAC: 13:1 (world-class)\n\nConclusion:\n- Unit economics are excellent\n- Payback <1 month (can scale aggressively)\n- LTV:CAC 9
Result:LTV:CAC 9.3:1 (excellent) | Payback <1 month | Can 3× CAC and still hit 3:1 target | Scale aggressively
Frequently Asked Questions
What is cohort profitability analysis?
Cohort analysis tracks group of customers acquired in same period (e.g., January 2024 cohort) through their lifecycle. Measures: retention rates, revenue per cohort, cumulative profit. Unlike aggregate metrics (all customers mixed), cohorts reveal: when profitability happens, retention curves, LTV trends. Example: January cohort 1,000 customers, Month 1 revenue $100K, Month 12 $30K (retention degraded). Calculate LTV, payback period, and long-term profitability per cohort.
What is LTV:CAC ratio and why does it matter?
LTV:CAC = Customer Lifetime Value / Customer Acquisition Cost. Measures payback on acquisition. Target: 3:1 (every $1 spent acquiring returns $3 in lifetime value). Example: CAC $100, LTV $300 → 3:1 (healthy). Below 1:1 = losing money on each customer. 1-2:1 = payback but tight. 2-3:1 = acceptable. >3:1 = excellent (or underinvesting in growth—could spend more on acquisition profitably). VCs use this to assess SaaS health.
How do I calculate customer lifetime value (LTV)?
LTV = Avg Order Value × Purchase Frequency × Margin % × Avg Customer Lifespan. Example: $50 AOV, 3 purchases/year, 40% margin, 4 year lifespan = $50 × 3 × 0.4 × 4 = $240. Subscription: LTV = Monthly fee × Margin % × (1 / Monthly churn rate). Example: $100/month, 70% margin, 5% churn = $100 × 0.7 / 0.05 = $1,400. Cohort method (more accurate): Track actual cohort cumulative revenue over time.
What causes cohort profitability to vary?
Cohorts differ by: (1) Acquisition channel (paid ads vs. organic have different CAC and quality), (2) Seasonality (holiday shoppers may have lower retention), (3) Product changes (feature launches improve retention), (4) Market conditions (recession cohorts churn more), (5) Targeting (improved ICP targeting increases LTV). Compare cohorts to identify: which acquisition sources have best LTV:CAC? Which product versions retain best? Optimize acquisition toward high-LTV cohorts.