Unit Economics for Fitness: LTV, CAC Ceiling, and “Growth That Pays” (Simple Model)
Why CPL is not a decision metric
Cost per lead (CPL) is useful—but it’s not the truth.
The truth is: what does a member *return* over time, and what can you afford to spend to acquire them?
That’s unit economics: LTV, contribution margin, CAC, and payback.
Step 1: Calculate LTV (simple, practical version)
Use a straightforward model:
LTV = weekly price × average membership months × gross margin
Example:
weekly price $25
average months 6
gross margin 70%
LTV ≈ 25 × 26 × 0.70 ≈ $455
It doesn’t need to be perfect; it needs to be consistent.
Step 2: Define your CAC ceiling
Your CAC ceiling is the maximum you can spend per join and still be happy.
A practical method:
decide a payback window (e.g., 8–12 weeks)
ensure you recover CAC inside that window
If your LTV is $900, you might set CAC ceiling at $250–$350 depending on margin and cashflow.
Step 3: Use decision rules (the part most gyms miss)
If CAC is above ceiling, you have three choices:
1) improve conversion (trial bookings, show rate, join rate)
2) improve LTV (price, retention, add-ons)
3) reduce cost (better targeting, better creative)
Most gyms only do #3.
But often the highest ROI fix is conversion or retention.
Worked example: where to fix first
If you spend $4,000/month, generate 60 leads, and get 15 joins:
CAC = $4,000 ÷ 15 = $267
If your CAC ceiling is $300, you’re fine.
If your CAC ceiling is $200, you need to fix a lever.
Before you cut ads, check:
speed-to-lead
show rate
trial-to-join
A small conversion lift can move CAC dramatically.
Common mistakes
Overestimating LTV
Ignoring gross margin
Not separating acquisition and retention levers
Scaling spend without a CAC ceiling
Making decisions from emotion
Implement this week
1) Calculate LTV (rough)
2) Set a CAC ceiling
3) Add CAC and LTV to your KPI set
4) Agree decision rules with your team
Growth should pay—not just look busy.