Cheatsheet 18 — Startup Unit Economics
The numbers that decide if an LLM product is a business. Full: Phase 15.05.
The cost ladder (model at each level)
cost per REQUEST = (input_tokens + output_tokens) × price/token (output usually pricier)
cost per TASK = cost per request × requests/task (agent loops/retries inflate this!)
cost per RESOLVED = cost per task ÷ success rate ← the TRUE unit
cost per USER = cost per resolved task × tasks/user/month
cost per WORKSPACE/DOC = aggregate to your billing unit
⚠️ LLM cost is per request (unlike ~$0-marginal SaaS) → margin must be engineered or it goes negative.
Key metrics
| Metric | Formula / target |
|---|---|
| Gross margin | (revenue − COGS) / revenue; target 70–80%+ |
| COGS (LLM) | inference (tokens/GPU) + retrieval + vector DB + infra |
| LTV | avg revenue/customer × lifetime (or / churn) |
| CAC | sales+marketing ÷ new customers |
| LTV:CAC | ≥ 3 (healthy) |
| CAC payback | months to recover CAC (< 12 good) |
| NRR | net revenue retention; > 100% = expansion (gold) |
The margin levers (engineer the margin)
| Lever | Effect | Ref |
|---|---|---|
| Routing (cheapest model that works) | Biggest lever | 8.05 |
| Caching (prompt/prefix/response) | Cut input cost on shared context | 7.05 |
| Token budget (trim prompts/context/output) | Linear cost cut | 9.07 |
| Distill/fine-tune a small model | Replace expensive model on narrow task | 13.04 |
| Self-host (past break-even) | Lower marginal cost at high volume | 6 |
Pricing
- Price to margin AND value, not to compete. Cover the true unit cost (per resolved task) + margin.
- Value-based pricing fits AI — charge a fraction of the expensive work you replace.
- Cap/meter usage — unlimited plans + power users = margin blowout (7.09).
Self-host break-even
APIs: low fixed cost, linear per-token, no ops → win at LOW/medium volume
Self-host: high fixed GPU+ops, flat marginal token → win at HIGH steady volume (if GPUs utilized)
Include ops/engineering cost, not just GPU $.
Interview line
"Every request costs money, so I model cost per resolved task — not per request, because agent loops and retries hide there — and engineer 70–80% gross margin with routing and caching. I price to margin and value, cap usage, and only self-host past break-even."
Back to: Cheatsheet index · Full: Phase 15.05