W3 NOTES BLOG | The Internet Money Feed : DIGITAL ECONOMY | Test Whether a Digital Product Can Actually Make Money — Calculate Unit Economics, Customer Acquisition Cost, and Break-Even Sales

A digital product can attract attention, generate sales, and

still lose money.

You might sell downloadable templates, offer website design, build a software subscription, run an online course, or operate a marketplace. In each case, revenue tells you how much money comes in. It does not tell you how much you keep, how much it costs to acquire customers, or whether the business can cover its expenses.

The difference matters. A product selling for ₦5,000 might appear profitable until you account for payment fees, delivery, customer support, marketing, refunds, subscriptions, and the time required to serve each customer.

This chapter teaches you how to build a simple unit-economics calculator in Google Sheets or another spreadsheet. You will use it to estimate your contribution per sale, customer acquisition cost, monthly break-even point, and the number of sales required to reach a target.

By the end, you will have a reusable model for testing a digital business idea before committing more money to it.

The figures in this chapter are illustrative examples, not current Nigerian market prices, income forecasts, or guarantees of business performance.

1. Start with the right business question

Suppose you want to sell a downloadable business-template pack for ₦5,000.

You expect to sell through social media, a blog, WhatsApp, or a digital-product storefront. Customers pay online and receive a download.

Your first question might be, “How many people will buy it?”

That matters, but there are more useful questions to answer first:

How much does each sale contribute after the costs directly associated with it?
How much does it cost to acquire a paying customer?
How much must you sell each month to cover your fixed expenses?
What happens if sales are lower than expected?
Can you deliver the product reliably without spending more than you earn?
Is the amount left over sufficient to compensate you for your time and risk?

These questions are part of unit economics: examining the revenue and costs associated with one unit of business activity, such as one sale, customer, order, or subscription.

The right unit depends on the business model. A digital download may use one completed sale. A web-development business might use one project. A subscription business may examine one paying customer per month.

Choose a unit that matches how your business earns revenue and incurs costs.

2. Separate revenue, variable costs, and fixed costs

Before opening your spreadsheet, classify the money flowing through your business.

Revenue

Revenue is the amount earned from selling a product or service before subtracting business expenses.

For a simple one-product business:

Revenue = Selling price × Number of completed sales

If you sell 20 products at ₦5,000 each:

₦5,000 × 20 = ₦100,000 revenue.

That does not mean you have made ₦100,000 in profit.

Refunds, discounts, taxes, payment fees, delivery costs, marketing, and other expenses may reduce the amount available to the business. Decide how you will record each of these items so that you do not subtract the same cost twice.

Variable costs

Variable costs change with the number of sales or the amount of service delivered.

Examples include:

Payment-processing fees.
Per-order delivery charges.
Packaging for physical products.
Usage-based software or AI API costs.
Commissions paid on individual sales.
Additional labour required to serve each customer.
Refunds or support costs when they can be reasonably estimated per sale.

A downloadable file may have low delivery costs, but that does not make delivery and support completely free. Your payment provider may charge transaction fees, and customers may need assistance.

Fixed costs

Fixed costs are expenses that remain relatively stable within a particular period and operating range, even if you sell more or fewer units.

Examples include:

Monthly software subscriptions.
Hosting fees.
Workspace rent.
Fixed salaries.
Internet expenses allocated to the business.
Accounting or administrative expenses.
Equipment costs allocated over an appropriate period.

Some costs are mixed. A software service may have a fixed subscription plus usage charges. Separate the two components when possible.

Also account for your own labour. If you spend many hours creating and supporting a product, treating your time as worthless can make a weak business look profitable.

For a more detailed explanation of break-even analysis, consult the U.S. Small Business Administration's business-planning guidance.

3. Calculate contribution per sale

Contribution is the amount a sale leaves after the costs included in the contribution calculation. That amount helps cover fixed expenses and, if sufficient money remains, profit.

Start with:

Contribution before customer acquisition = Selling price − Other variable costs per sale

Suppose your digital template pack has these illustrative figures:

Item	Amount
Selling price	₦5,000
Payment and delivery costs per sale	₦300
Average support and fulfilment cost per sale	₦500
Total variable costs before acquisition	₦800
Contribution before acquisition	₦4,200

The calculation is:

₦5,000 − ₦800 = ₦4,200.

The contribution margin before acquisition is:

₦4,200 ÷ ₦5,000 × 100 = 84%.

This means 84% of the selling price remains after the variable costs included in this example, but before customer acquisition and fixed expenses.

It does not mean the business earns an 84% net profit margin.

That distinction is important. A product can have a high contribution margin before marketing and still be unprofitable if acquiring customers is expensive.

4. Calculate customer acquisition cost

Customer acquisition cost (CAC) measures how much you spend to obtain a paying customer.

For a defined period:

CAC = Customer acquisition expenses ÷ New paying customers acquired

Suppose you spend ₦60,000 on marketing during a month and acquire 20 new paying customers attributable to that activity.

₦60,000 ÷ 20 = ₦3,000 CAC.

Your average acquisition cost is ₦3,000 per new customer.

This is an illustrative example. Actual CAC depends on the audience, offer, marketing channel, conversion rate, sales process, and the costs included in the calculation.

Calculate CAC carefully

Decide which acquisition expenses to include. Depending on the business, they may include:

Advertising.
Sales commissions.
Freelance marketing work.
Lead-generation tools.
Marketing software.
A reasonable allocation of sales labour.

Be consistent about the period and customer group you are measuring.

If you include only advertising spend, call the result advertising cost per acquired customer rather than implying it captures every acquisition expense.

Also distinguish new customers from returning customers. If an existing customer buys again, that sale is valuable, but it should not automatically be counted as a newly acquired customer.

Compare contribution with CAC

Return to the template business.

Item	Amount per sale
Selling price	₦5,000
Other variable costs	₦800
CAC	₦3,000
Contribution after acquisition	₦1,200

The calculation is:

₦5,000 − ₦800 − ₦3,000 = ₦1,200.

Each sale contributes an estimated ₦1,200 toward fixed costs and profit, assuming the cost estimates are accurate and the acquisition expense is appropriately allocated.

If your fixed monthly expenses are ₦120,000, 20 sales at these economics would generate:

Revenue: ₦100,000.
Other variable costs: ₦16,000.
Acquisition expenses: ₦60,000.
Amount remaining before fixed expenses: ₦24,000.

After the ₦120,000 fixed expenses, the illustrative operating result would be a loss of ₦96,000.

The business may have made sales, but the sales have not covered its costs.

This is why counting sales alone is an inadequate way to judge business health.

5. Build your unit-economics calculator in Google Sheets

Now create a spreadsheet that performs these calculations automatically.

You can use the Google Sheets mobile app or open Google Sheets in a browser. Menu placement may differ slightly by device and version.

Step 1: Create a new spreadsheet

Open Google Sheets.
Sign in to the Google account you want to use.
Create a blank spreadsheet using the available + or Blank spreadsheet option.
Give the file a clear name, such as Digital Product Unit Economics.
Rename the first sheet Model if you want a more descriptive worksheet name.

If you are working on a phone, you can zoom in and use the formula bar to edit cells more comfortably.

Step 2: Enter the input labels

In column A, enter the following labels. Enter the corresponding example values in column B.

Cell	Label	Example value
A1	DIGITAL PRODUCT UNIT ECONOMICS
A3	Selling price per sale
B3		5000
A4	Variable costs per sale, excluding acquisition
B4		800
A5	Monthly acquisition expenses
B5		60000
A6	New paying customers acquired
B6		20
A7	Monthly fixed costs
B7		120000
A8	Expected monthly sales
B8		120
A9	Additional target operating profit
B9		50000

These values are only test inputs. Replace them with your own measured or estimated figures when building a real model.

Keep input cells separate from calculated results. This makes it easier to change assumptions without accidentally overwriting formulas.

Step 3: Add the calculation labels

Enter the following labels in column A:

Cell	Label
A11	CAC per new customer
A12	Contribution before acquisition
A13	Contribution after acquisition
A14	Contribution margin after acquisition
A15	Break-even sales per month
A16	Expected monthly revenue
A17	Expected monthly operating result
A18	Sales required for target operating profit

Step 4: Enter the formulas

Select each result cell in column B and enter its formula.

In B11 — CAC per new customer:

=IFERROR(B5/B6,0)

In B12 — Contribution before acquisition:

=B3-B4

In B13 — Contribution after acquisition:

=B12-B11

In B14 — Contribution margin after acquisition:

=IFERROR(B13/B3,0)

Format B14 as a percentage using the spreadsheet's number-formatting controls.

In B15 — Break-even sales per month:

=IF(B13>0,ROUNDUP(B7/B13,0),"Not viable at current unit economics")

This formula assumes each additional sale carries the same average acquisition cost and other variable costs. It also assumes the fixed costs remain stable over the range being tested.

In B16 — Expected monthly revenue:

=B3*B8

In B17 — Expected monthly operating result:

=B13*B8-B7

In B18 — Sales required for target operating profit:

=IF(B13>0,ROUNDUP((B7+B9)/B13,0),"Not viable at current unit economics")

If your spreadsheet uses semicolons instead of commas to separate formula arguments, replace the commas accordingly.

Step 5: Check the results

With the example inputs, your model should calculate:

Metric	Expected result
CAC per new customer	₦3,000
Contribution before acquisition	₦4,200
Contribution after acquisition	₦1,200
Contribution margin after acquisition	24%
Break-even sales	100
Expected monthly revenue at 120 sales	₦600,000
Expected operating result at 120 sales	₦24,000
Sales needed for ₦50,000 target operating profit	142

The model predicts that 100 sales cover the ₦120,000 fixed costs if each sale contributes ₦1,200 after acquisition and other variable costs.

At 120 sales, the estimated operating result is:

(120 × ₦1,200) − ₦120,000 = ₦24,000.

To generate at least ₦50,000 in operating profit under these assumptions, the model rounds up to 142 sales.

These calculations are estimates, not promises. The model becomes unreliable if costs, prices, conversion rates, refunds, or acquisition efficiency change significantly as sales grow.

Step 6: Format the spreadsheet

Make the sheet readable and easier to use:

Bold the main title in A1.
Bold the calculation labels in A11:A18.
Format the financial input and output cells as Nigerian naira where the formatting option is available.
Format B14 as a percentage.
Distinguish input cells from calculated cells using consistent formatting.
Freeze or protect formula cells if your workflow requires it and your spreadsheet version supports those features.
Keep a note of when the assumptions were last updated.

Do not rely on formatting alone to protect your formulas. Review the sheet before sharing it with anyone who might edit the inputs.

6. Interpret the break-even result correctly

The basic break-even formula is:

Break-even units = Fixed costs ÷ Contribution per unit

The contribution per unit must reflect the costs you intend to include in the model.

In our example, contribution after acquisition is ₦1,200 and monthly fixed costs are ₦120,000:

₦120,000 ÷ ₦1,200 = 100 sales.

This is the estimated number of sales needed to cover the fixed costs under the stated assumptions.

If contribution per sale falls, the break-even quantity rises. If contribution increases, fewer sales may be required.

If contribution is zero or negative, selling more units at the same economics will not solve the problem. You must change the price, reduce costs, improve acquisition efficiency, or change the offer or business model.

A warning about customer acquisition costs

CAC is not always a simple constant per sale.

The first 20 customers might come from a small, highly relevant audience. Acquiring the next 100 may require broader advertising, additional sales labour, or more expensive channels.

If your acquisition cost rises as you scale, the original break-even estimate will be too optimistic.

For that reason, keep track of actual results by marketing channel and customer group. Update your model when the evidence changes.

7. Test different business scenarios

A useful spreadsheet does more than calculate one expected outcome. It helps you test what happens when assumptions change.

Use a copy of your model or change the input cells to examine these scenarios.

Scenario A: Reduce acquisition costs

Suppose you improve your product page, get more qualified enquiries, or generate additional sales through referrals.

If the cost per new customer falls, contribution after acquisition increases, assuming other costs remain the same.

But do not assume that referrals are completely free. Your time, referral incentives, content production, and other associated expenses may still carry costs.

Scenario B: Change the price

A higher price may increase contribution per sale, but it can also reduce conversion rates or increase customer expectations.

A lower price may make the product more accessible, but it requires enough additional sales to compensate for the reduced contribution per sale.

Test prices using real customer feedback and observed buying behaviour rather than assuming that the highest price produces the highest profit.

Scenario C: Reduce delivery costs

You might improve a digital product's onboarding instructions, automate delivery, simplify customer support, or remove unnecessary software subscriptions.

Estimate the cost reduction, but verify that it does not damage product quality or customer experience.

For an AI-powered service, remember that usage costs can grow with the number of customers or the intensity of their activity. A flat subscription price may become unprofitable if heavy users consume far more resources than expected.

Scenario D: Test lower sales

Reduce the expected monthly sales figure in B8.

Observe how quickly the projected operating result falls. This helps you understand the level of sales risk your business can tolerate.

A business that only works when everything goes according to plan may need more cash reserves, a lower fixed-cost structure, a better offer, or a more reliable acquisition process.

Scenario E: Test the value of your own time

Estimate the hours required to create, market, deliver, and support the product.

Assign a reasonable internal hourly rate to your work and estimate the total labour cost.

If your business only appears profitable because your labour is excluded, it may be generating self-employment income without yet producing an attractive economic return.

That is not necessarily a reason to abandon it. It is a reason to understand what you are actually earning and whether the process can improve.

8. Understand the limits of a simple unit-economics model

A spreadsheet is a decision aid, not a substitute for accounting or market research.

The model above assumes a single product, a consistent price, reasonably stable costs, and a usable estimate of customer acquisition cost.

Real businesses may need additional calculations for:

Discounts and refunds.
Taxes and statutory obligations.
Multiple products or service packages.
Currency conversion and international payment fees.
Inventory, equipment, and depreciation.
Customer support and failed deliveries.
Subscription cancellations and renewals.
Working capital and delayed settlements.
Seasonal demand.
Cash-flow timing.
Founder labour and the cost of hiring.
Customer retention and repeat purchases.

For recurring-revenue businesses, you may also need to examine customer lifetime value (LTV), churn, and the time required to recover acquisition costs. These measures require reliable customer and retention data; early estimates can be misleading.

Do not apply a universal LTV-to-CAC benchmark blindly to every digital business. A subscription software company, a one-off digital download, and a website-development studio have different sales cycles, margins, retention patterns, and cash-flow requirements.

The aim is to use metrics that match your business model, not to collect impressive-looking numbers.

9. Turn the calculator into a business decision

After building the sheet, use the results to make a clear decision.

If the contribution per sale is healthy

Continue testing demand, delivery quality, customer satisfaction, and the reliability of your acquisition channel. A positive contribution is encouraging, but it does not prove that the business has sufficient demand or can scale profitably.

If the contribution is too small

Investigate the largest cost drivers. Consider whether you can improve pricing, reduce avoidable costs, simplify delivery, or target customers who value the offer more strongly.

Do not cut costs that are essential to quality, security, reliability, or customer trust.

If the contribution is negative

Pause expansion until you understand the problem. Selling more at a negative contribution can increase losses.

Check for incorrect assumptions, double-counted costs, unusually expensive acquisition, underpricing, or a product that requires too much manual support.

If the model looks profitable but demand is unproven

Treat the result as a hypothesis. Interview potential customers, test a clear offer, measure enquiries and conversions, and record real costs.

A spreadsheet can establish what must be true for the business to work. It cannot establish that customers will actually buy.

10. Your practical assignment

Choose one real digital product or service you want to offer. It could be a downloadable guide, a website package, a design service, an online course, a small software tool, or another clearly defined offer.

Complete the following exercise.

Part 1 — Define the unit

Write down exactly what one unit means: one product sale, one website project, one paid subscription for one month, or another appropriate unit.

Part 2 — Estimate the economics

Record the selling price, variable costs, customer acquisition expenses, expected new customers, and fixed monthly costs.

Mark each figure as either an observed fact, a supplier quote, or an estimate.

Part 3 — Build the calculator

Create the Google Sheets model and enter the formulas from this chapter.

Part 4 — Test three scenarios

Calculate the result under a lower-sales scenario, a higher-cost scenario, and an improved-contribution scenario.

Part 5 — Set a decision rule

Write down what evidence would make you continue, revise, or pause the offer. For example, you might require a minimum contribution per sale and evidence of actual customer demand before increasing your marketing budget.

Part 6 — Review the evidence

After you test the offer, replace estimates with actual sales, payment fees, refunds, acquisition expenses, and delivery costs. Record the period covered by each measurement.

Your finished calculator should answer three questions:

How much does one sale contribute after the costs included in your model?
How many sales are needed to cover the fixed expenses?
What must change if the business cannot achieve the required sales or contribution?

The Bigger Lesson

The digital economy creates opportunities to distribute products, sell services, reach customers, and automate parts of business operations. But digital distribution does not automatically create a sustainable business.

A product can be easy to deliver and still be difficult to sell. A platform can generate enormous transaction volume while retaining only a small portion as revenue. A growing business can run short of cash even when its sales are increasing.

The important skill is learning to connect customer value with measurable business economics.

Start with one offer. Identify its costs. Measure what remains from each sale. Estimate the sales required to cover expenses. Then test the assumptions against real customer behaviour.

Do not scale a digital business merely because the technology works or people are paying. Scale when you have evidence that the offer can create value, acquire customers, deliver reliably, and retain enough economic value to sustain the business.

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Monday, October 12, 2026

DIGITAL ECONOMY | Test Whether a Digital Product Can Actually Make Money — Calculate Unit Economics, Customer Acquisition Cost, and Break-Even Sales