Model unit economics, MRR/ARR projections, pricing tiers, runway, and break-even analysis
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Before starting, gather project context silently:
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Before starting, gather project context silently:
PORTFOLIO.md if it exists in the project root or parent directories for product/team contextcat package.json 2>/dev/null || cat build.gradle.kts 2>/dev/null || cat Podfile 2>/dev/null to detect stackgit log --oneline -5 2>/dev/null for recent changesls src/ app/ lib/ functions/ 2>/dev/null to understand project structureUnit economics, revenue modeling, and financial projections for SaaS and subscription businesses. Make pricing decisions with math, not vibes.
| Need | Output |
|---|---|
| Unit economics | CAC, LTV, payback period, margins |
| Revenue model | MRR/ARR projections with assumptions |
| Pricing analysis | Tier comparison, willingness-to-pay, margin impact |
| Fundraising model | 12-24 month projection, burn rate, runway |
| Break-even analysis | When does this product cover its costs? |
| Plan comparison | Free vs freemium vs paid — which model wins? |
MRR (Monthly Recurring Revenue):
= sum of all active subscriptions per month
Components: New MRR + Expansion MRR - Churned MRR - Contraction MRR
ARR (Annual Recurring Revenue):
= MRR × 12
ARPU (Average Revenue Per User):
= MRR / total paying customers
CAC (Customer Acquisition Cost):
= total sales & marketing spend / new customers acquired
Include: ads, content, sales salaries, tools
LTV (Lifetime Value):
= ARPU / monthly churn rate
Alternative: ARPU × average customer lifespan (months)
LTV:CAC Ratio:
Target: > 3:1 (healthy)
Warning: < 3:1 (spending too much to acquire)
Danger: < 1:1 (losing money on every customer)
Payback Period:
= CAC / ARPU (in months)
Target: < 12 months
Monthly Churn Rate:
= customers lost this month / customers at start of month
Target: < 5% for SMB, < 2% for mid-market, < 1% for enterprise
Net Revenue Retention (NRR):
= (Starting MRR + Expansion - Contraction - Churn) / Starting MRR
Target: > 100% (expansion revenue exceeds churn)
Best-in-class: > 120%
Month-by-month model:
Starting Customers = previous month ending customers
New Customers = marketing leads × conversion rate
Churned Customers = starting customers × churn rate
Ending Customers = starting + new - churned
MRR = ending customers × ARPU
New MRR = new customers × ARPU
Churned MRR = churned customers × ARPU
Net New MRR = new MRR - churned MRR
Costs:
Infrastructure = base + (per-user cost × customers)
Team = salaries + benefits + contractors
Marketing = new customers × CAC
Tools/Services = fixed monthly costs
Profit/Loss = MRR - total costs
Cumulative P&L = running total (shows path to profitability)
Pricing framework:
| Tier | Monthly | Annual (discount) | Target Segment | Margin |
|------|---------|-------------------|----------------|--------|
| Free | $0 | - | Lead generation, product-led growth | Negative |
| Starter | $X | $X×10 (17% off) | Solo/small teams, price-sensitive | 60%+ |
| Pro | $Y | $Y×10 (17% off) | Growing teams, power users | 70%+ |
| Enterprise | Custom | Annual only | Large orgs, compliance needs | 80%+ |
Pricing rules:
- 3 paid tiers maximum (paradox of choice)
- 10x value gap between cheapest and most expensive
- Annual discount: 15-20% (improves cash flow + retention)
- Free tier: only if product-led growth model, with clear upgrade trigger
- Enterprise: always custom/contact-us (higher deal size)
The value metric is what you charge based on. It should:
✅ Scale with the customer's success (they pay more as they get more value)
✅ Be easy to understand (no complex formulas)
✅ Be predictable (customer can forecast their bill)
Common value metrics:
- Per seat/user (Slack, Notion)
- Per usage/volume (Stripe, Twilio)
- Per feature tier (most SaaS)
- Flat rate (Basecamp)
Best for small business clients: feature-based tiers with clear upgrade triggers
Fixed costs (don't change with customers):
Team salaries, office, tools, base infrastructure
Variable costs (scale with customers):
Per-user infrastructure, support time, payment processing fees
Gross margin:
= (Revenue - Variable Costs) / Revenue
Target: > 70% for SaaS
Break-even point:
= Fixed Costs / (ARPU - Variable Cost Per Customer)
= number of customers needed to cover all costs
Example:
Fixed costs: $15,000/month (team + tools)
ARPU: $49/month
Variable cost: $5/customer/month (infra + Stripe fees)
Break-even: $15,000 / ($49 - $5) = 341 customers
Cash runway (months):
= Cash in bank / Monthly burn rate
Monthly burn rate:
= Total monthly expenses - Total monthly revenue
Example:
Cash: $200,000
Monthly expenses: $25,000
Monthly revenue: $8,000
Burn rate: $17,000
Runway: 11.8 months
Rules of thumb:
- Raise when you have 6+ months runway remaining
- Default alive: revenue growing fast enough to cover costs before cash runs out
- Default dead: burn rate exceeds growth trajectory
FINANCIAL MODEL — [PRODUCT NAME]
Date: [TODAY]
Projection Period: 12 months
ASSUMPTIONS
Starting customers: X
Monthly new customers: X (growing Y% month-over-month)
Monthly churn rate: X%
ARPU: $X
CAC: $X
Monthly fixed costs: $X
Variable cost per customer: $X
UNIT ECONOMICS
LTV: $X
LTV:CAC: X:1
Payback period: X months
Gross margin: X%
12-MONTH PROJECTION
| Month | Customers | MRR | Costs | Net | Cumulative |
|-------|-----------|-----|-------|-----|------------|
| 1 | ... | ... | ... | ... | ... |
| ... | | | | | |
| 12 | ... | ... | ... | ... | ... |
BREAK-EVEN
Customers needed: X
Projected month: Month X
KEY RISKS
- [Risk 1] — [Impact if realized]
- [Risk 2] — [Impact if realized]
RECOMMENDATIONS
- [Pricing/growth/cost recommendation]
Use WebSearch to fetch current SaaS benchmarks:
Compare project metrics against benchmarks and flag outliers.
Generate using Write:
docs/financial-model.md with all metrics, assumptions, and scenariosdocs/pricing-analysis.md — tier comparison with value metricsdocs/unit-economics.md — CAC, LTV, payback period with sensitivity analysisFor comparison against industry norms:
| Metric | Seed | Series A | Series B+ |
|--------|------|----------|-----------|
| MRR | $10-50K | $100-500K | $1M+ |
| Growth (MoM) | 15-20% | 10-15% | 5-10% |
| Churn (monthly) | 5-7% | 3-5% | 1-3% |
| LTV:CAC | 2-3x | 3-5x | 5x+ |
| Gross Margin | 60-70% | 70-80% | 80%+ |
| NRR | 90-100% | 100-110% | 110-130% |
| Payback (months) | 12-18 | 8-12 | 3-8 |