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CMA Final · Entrepreneurship and Startup · Idea to Action

Case: Veda Foods, a startup, has 1,000 customers and monthly revenue growing 15%. Each customer costs Rs 600 to acquire and generates a contribution of Rs 200 per month, and the average customer stays for 6 months. The founder wants to know whether growth is economically sound. What conclusion follows from the unit economics?

Lifetime contribution per customer is Rs 200 times 6 months, or Rs 1,200, against an acquisition cost of Rs 600. The net gain is Rs 600 and the lifetime value to acquisition cost ratio is 2:1, with payback in three months, so growth is economically sound.

  1. ALifetime contribution is Rs 1,200 against acquisition cost of Rs 600, so each customer adds Rs 600 net, ratio 2:1Correct
  2. BLifetime contribution is Rs 1,200 against acquisition cost of Rs 600, so the ratio is 0.5:1 and growth is unsound
  3. CLifetime contribution is Rs 3,600, so payback occurs only after 6 months
  4. DAcquisition cost exceeds monthly contribution, so every customer is loss-making over lifetime

Explanation

Lifetime contribution = Rs 200 x 6 = Rs 1,200. Acquisition cost is Rs 600, so net gain is Rs 600 and the LTV to CAC ratio is 2:1. Payback is 600/200 = 3 months, within the 6-month life. The option inverting the ratio and the one multiplying 600 by 6 are miscalculations.

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