Practice · Unit Economics
Unit economics for case interviews
Unit economics questions test whether you understand the financial mechanics of a business at the per-customer or per-unit level. These appear frequently in tech, SaaS, and subscription-model cases — and increasingly in traditional industry cases.
Why interviewers test this
MBB firms use unit economics to test business intuition alongside math. Knowing that LTV:CAC should be >3x, or that a 3% monthly churn means ~70% annual retention, shows you understand what the numbers mean — not just how to calculate them.
Worked examples
CAC is €60. Monthly ARPU is €20. Monthly churn is 5%. What is the LTV:CAC ratio?
LTV = ARPU / churn = €20 / 0.05 = €400. LTV:CAC = €400 / €60 ≈ 6.7x. This is a healthy ratio (above the 3x benchmark).
A subscription costs €15/month. Customer acquisition cost is €90. Payback period?
Payback = CAC / monthly revenue = €90 / €15 = 6 months. Under 12 months is generally healthy for consumer subscriptions.
Strategies
LTV = ARPU / churn rate. This is the most important formula in SaaS case math.
Healthy benchmarks: LTV:CAC > 3x, payback period < 12 months, net revenue retention > 100%.
Convert between monthly and annual churn carefully: 3% monthly ≠ 36% annual. It's 1 - (0.97)^12 ≈ 31%.
When given annual figures, convert to monthly first — it makes the arithmetic cleaner.
Difficulty 2-4. Easy: single ratio calculation. Hard: multi-step with churn conversion and margin impact.
Practice unit economics under pressure
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