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Unit Economics

Revenues and costs per unit, to calculate cash flows over time and customer lifetime value (LTV)

Per unit economics

Item	Amount	Type, Notes
Revenues
One-time hardware sale	$200	One time
Annual software subscription	$100	Recurring
Additional hardware (sensors and coolers)	$130	One time
VR Headset sale	$300	One time
Cost of Sales
Sensors (average)	$30	One time
Coolers	$100	One time
Device	$200	One time
VR Headset	$300	One time
Software	$100	Recurring

Optional: Hide or show the column notes: show

Revenues

Description	Amount	Type
Hardware unit sale (average revenue per unit)	$200	One time
Annual software subscription	$100	Recurring
Additional hardware (sensors and coolers)	$130	One time
VR Headset sale (one-time revenue, not included in recurring)	$300	One time

Cost of Sales

Description	Percentage	Type
Cost of hardware components	90%	One time
Cost of software (recurring)	10%	Recurring

Optional: Discounts

Description	Amount	Notes
Discounts for recurring	$0	Total, over billing period
Discounts for transaction	$0	Total, first transaction only

Churn and Growth, Recurring

Description	Amount	Notes
Recurring - Period for billing, # of months	12	Defines the billing cycle, so that cash collection can be separate from revenues. By default, this equals the period for churn, but you can overwrite and change it
Recurring - Period for churn, growth, # months	12	Define the length of a cycle for churn. Annual = 12, monthly = 1
% Growth in Gross Margin per unit, linear annual growth	30%	Annual rate, linear growth
% Churn, every 12 months	5%	% that do not renew
Average Customer Lifetime	240	# months

Timing, One time

Description	Amount	Notes
Months after acquisition when one-time occurs	12	Months; this will be zero for upfront, one-time fees, perhaps assume 12 for one-time fees that happen after 1 year

Churn and Growth, Transaction

Description	Amount	Notes
Transaction - Period for churn, growth, # months	12	Months
% Growth in Gross Margin per unit, linear annual growth	30%	Annual rate, linear growth
% Churn, every period	5%	% that do not repeat
Average # Repeat Transactions per year	1.0	Average lifetime one time purchases, before churn
Average # of Lifetime Transactions	20.0	Calculated

Discount Rate

Description	Amount	Notes
Discount Rate	5.0%	Optional, assume an annual rate. Used if you want to discount the future cash flows, using methodology from https://www.forentrepreneurs.com/ltv/
K, Recurring	0.95	Optional, only used if using discount rate
K, Transaction	0.95	Optional, only used if using discount rate

Acquisition and Retention Costs

Description	Amount	Notes
Customer Acquisition Cost (CAC)	$120	May need to adjust based on one time discounts, which costs to use from CAC forecast, and other business-specific issues
Cost of Retention and Expansion, Recurring	$10	For subscription renewals
Cost of Repeat and Expansion, Transaction	$120	For repeat transactions

LTV Analysis

Description	Amount	Notes
LTV, Recurring	$38	Formula for LTV from https://www.forentrepreneurs.com/ltv/ to use discount rate (optional), and growth in average revenue (optional)
LTV, One-time	$(1,160)	LTV = revenues less cost of sales for this one time cash flow assumed in the first month of forecast
LTV, Transaction	$(1,122)	Formula for LTV from https://www.forentrepreneurs.com/ltv/ to use discount rate (optional), and growth in average revenue (optional)
LTV	$(1,122)	Sum of all LTVs
LTV / CAC	$(9)	LTV / CAC, to help measure profitability performance
CAC Payback	$(1.50)	# of months to payback the customer acquisition costs, based on gross margin

Details for LTV calculations and Cash Flows per month +

Click on the "+" sign in the margin to see the detail behind the calculations

Revenues, Cost of Sales, Gross Margin for LTV calculations

Description	Amount	Type
Total Revenues, Recurring	$100	Recurring
Total Revenues, One-time	$400	One time
Total Revenues, Transaction	$0	Transaction
Total Cost of Sales, Recurring	90%	Recurring
Total Cost of Sales, One-time	90%	One time
Total Cost of Sales, Transaction	0%	Transaction
Gross Margin, Recurring	$10
Gross Margin, One-time	$40
Gross Margin, Transaction	$0
Gross Margin, Recurring, less cost of retention and expansion, recurring	$10
Gross Margin, One-time, less retention	$40	Same as gross margin above
Gross Margin, Transaction, less retention	$(120)	Includes costs of retention, expansion, and repeat in the gross margin calculation, reflecting CORE expenses as per https://www.forentrepreneurs.com/ltv/

Per Month Cash Flows (continued)

Description	Month from acquisition
	1
Recurring (Timing of Renewal / Churn) #	-
Repeat (Timing of Repeat / Churn) #	-
Transactions (New and Repeat) #	1
Retention, Recurring %	100%
Retention, One-time %	100%
Retention, Transaction %	100%

Unit Economics, net of churn, per period

Description	Amount per period	Notes
Revenues, Recurring	$100.0
Revenues, One-time	$400.0
Revenues, Transaction	$0.0
Cost of Sales, Recurring	$90.0
Cost of Sales, One-time	$360.0
Cost of Sales, Transaction	$0.0
Billings, net discounts, Recurring	$1200.0
Billings, net discounts, One-time	$400.0
Billings, net discounts, Transaction	$0.0
Acquisition Costs	$120.0
Retention Costs	$10.0
Repeat Acquisition Costs	$120.0
Billings, net of churn	$1542.0
Net Revenues, net of churn	$495.0
Cost of Sales, net of churn	$446.0
Gross Margin, net of churn, per period	$49.0
Cumulative Gross Margin, net of churn	$169.0
Net Gross Margin, net of churn, discounted	$47.0
Cumulative Gross Margin, net of churn, discounted	$164.0

LTV Analysis

Description	Amount	Notes
LTV, Recurring	$38	Formula from For Entrepreneurs
LTV, One-time	$(120)
LTV	$(9)	To help measure profitability performance
CAC Payback	$(1.50)	Number of months to pay back the customer acquisition costs, based on gross margin

Revenues, Cost of Sales, Gross Margin for LTV calculations

Description	Amount	Type
Total Revenues, Recurring	$100	Recurring
Total Revenues, One-time	$400	One time
Total Revenues, Transaction	$0	Transaction
Total Cost of Sales, Recurring	90%	Recurring
Total Cost of Sales, One-time	90%	One time
Total Cost of Sales, Transaction	0%	Transaction
Gross Margin, Recurring	$10
Gross Margin, One-time	$40
Gross Margin, Transaction	$0
Gross Margin, Recurring, less cost of retention and expansion, recurring	$10
Gross Margin, One-time, less retention	$(120)	Includes costs of retention, expansion, and repeat in the gross margin calculation, reflecting CORE expenses as per For Entrepreneurs

Cash Flow, per period and cumulative

Description	Amount per period	Cumulative Amount	Notes
Net Cash Flow, per period	$990
Cumulative Net Cash Flow		$990
Net Cash Flow, per period, discounted	$990
Cumulative Net Cash Flow, discounted		$990

Timescale

Description	Month from acquisition
	1
Recurring (Timing of Billing Cycle) #	-
Recurring (Timing of Renewal / Churn) #	-
Repeat (Timing of Repeat / Churn) #	-
Transactions (New and Repeat) #	1
Retention, Recurring %	100%
Retention, One-time %	100%
Retention, Transaction %	100%

Unit Economics, net of churn, per period

Description	Amount per period	Notes
Revenues, net of churn, Recurring	$100.0
Revenues, net of churn, One-time	$400.0
Revenues, net of churn, Transaction	$0.0
Cost of Sales, net of churn, Recurring	$90.0
Cost of Sales, net of churn, One-time	$360.0
Cost of Sales, net of churn, Transaction	$0.0
Billings, net discounts, Recurring	$1200.0
Billings, net discounts, One-time	$400.0
Billings, net discounts, Transaction	$0.0
Acquisition Costs, net of churn	$120.0
Retention Costs, net of churn	$10.0