unit-economics

Unit Economics Analysis

Workflow

Step 1: Identify Business Model

Determine the revenue model to tailor the analysis:

• SaaS / Subscription (e.g., healthcare AI, RCM automation, ambient scribe): ARR, net retention, cohorts
• Recurring services: Contract value, renewal rates, upsell
• Transaction / usage-based: Revenue per transaction, volume trends, take rate
• Multi-site healthcare services (PPM, ASC, behavioral health, home health, dental, vet, med-spa): per-clinic / per-site / per-patient economics, same-store vs. de novo vs. M&A
• Hybrid: Break down by revenue stream

Step 2: Core Metrics

ARR / Revenue Quality

• ARR bridge: Beginning ARR → New → Expansion → Contraction → Churn → Ending ARR
• ARR by cohort: Vintage analysis — how does each annual cohort retain and grow?
• Revenue concentration: Top 10/20/50 customers (or payors) as % of total; payor mix (Medicare / Medicaid / commercial / self-pay) for healthcare services
• Revenue by type: Recurring vs. non-recurring vs. professional services; FFS vs. capitated / VBC
• Contract structure: ACV distribution, multi-year %, auto-renewal %; payor contract terms and escalators

Customer Economics

• CAC (Customer Acquisition Cost): Total S&M spend / new customers acquired
• LTV (Lifetime Value): (ARPU × Gross Margin) / Churn Rate
• LTV:CAC ratio: Target >3x for healthy businesses
• CAC payback period: Months to recover acquisition cost
• Blended vs. segmented: Break down by customer segment (enterprise vs. SMB vs. mid-market; or by payor/specialty for healthcare)

Retention & Expansion

• Gross retention: % of beginning ARR retained (excludes expansion)
• Net retention (NDR): % of beginning ARR retained including expansion
• Logo churn: % of customers lost
• Dollar churn: % of revenue lost (often different from logo churn)
• Expansion rate: Upsell + cross-sell as % of beginning ARR

Cohort Analysis

Build a cohort matrix showing:

Cohort	Year 0	Year 1	Year 2	Year 3	Year 4
2020	$1.0M	$1.1M	$1.2M	$1.1M
2021	$1.5M	$1.7M	$1.8M
2022	$2.0M	$2.3M
2023	$3.0M

Show both absolute $ and indexed (Year 0 = 100%) views.

For multi-site healthcare platforms, build an analogous clinic/site cohort matrix:

• Sites grouped by year opened or acquired
• Track revenue, visits, and contribution margin ramp per site vintage
• Separate same-store, de novo, and acquired-site trajectories

Margin Waterfall

• Revenue → Gross Profit → Contribution Margin → EBITDA
• Fully loaded unit economics: what does it cost to acquire, serve, and retain a customer (or patient)?
• Gross margin by revenue stream (subscription vs. services vs. other; FFS vs. VBC vs. ancillaries)

Per-Site / Per-Patient Metrics (healthcare services)

• Revenue per site / clinic / ASC / location
• Patient visits per site; visits per provider; provider productivity
• Revenue per visit / per patient / per encounter
• Contribution margin per site; site-level EBITDA
• De novo ramp curve (months to breakeven, months to mature EBITDA)
• Site-of-service economics (ASC vs. HOPD, in-home vs. clinic)

Step 3: Benchmarking

Compare unit economics to relevant benchmarks:

• SaaS Rule of 40: Growth rate + EBITDA margin > 40%
• SaaS Magic Number: Net new ARR / prior period S&M spend > 0.75x
• NDR benchmarks: Best-in-class >120%, good >110%, concerning <100%
• LTV:CAC: Best-in-class >5x, good >3x, concerning <2x
• Gross retention: Best-in-class >95%, good >90%, concerning <85%
• CAC payback: Best-in-class <12mo, good <18mo, concerning >24mo

Step 4: Revenue Quality Score

Synthesize into a revenue quality assessment:

Factor	Score (1-5)	Notes
Recurring %
Net retention
Customer / payor concentration
Cohort / site-vintage stability
Growth durability
Margin profile
Overall

Step 5: Output

• Excel workbook with ARR bridge, cohort matrix, unit economics dashboard (add per-site tab for multi-site healthcare platforms)
• Summary slide with key metrics and benchmarks
• Red flags and areas for further diligence

Important Notes

• Always ask for raw customer-level (or site-level / patient-level) data if available — aggregate metrics can hide problems
• NDR above 100% can mask high gross churn if expansion is strong enough — always show both
• Cohort analysis is the single most important view for revenue quality — push for this data
• Differentiate between contracted ARR and actual recognized revenue
• For usage-based models, focus on consumption trends and expansion patterns rather than traditional ARR metrics
• Professional services revenue should be evaluated separately — it's not recurring and margins are typically lower
• For multi-site healthcare services, separate same-store growth from de novo ramp and M&A contribution; watch for labor inflation (RN / MA / physician) eroding per-site contribution margin; monitor payor mix shift and VBC exposure distinctly from volume/pricing