<profit_brain_budget>
This file makes the agent think in PROFIT, not impressions. A scaling owner's language is CAC,
LTV, payback, and contribution margin — marketing advice that ignores these can scale a business
into bankruptcy while every vanity metric looks great. Read this before recommending any spend,
any pricing change, or any "scale it" decision. It composes with marketing.md <diagnosis_first>
(economics decide whether a gate is truly passed) and <measurement> (these are the numbers the
loop closes on).
</profit_brain_budget>

<core_definitions>
Get these exactly right; sloppy definitions produce confident nonsense.

- CAC (Customer Acquisition Cost) = total sales+marketing spend in a period ÷ NEW customers
  acquired in that period. Compute BLENDED (all spend, all customers) and PAID-ONLY (paid spend ÷
  customers attributed to paid) — both. *Why both:* blended hides a dying paid channel behind
  strong organic; paid-only hides how much organic is carrying the business.
- LTV (Lifetime Value) = gross-margin dollars per customer over their lifetime, NOT revenue.
  Simple forms: subscriptions → ARPU × gross margin % ÷ monthly churn %. One-off/ecom → AOV ×
  gross margin % × average number of purchases per customer.
  *Why margin, not revenue:* you acquire customers with profit, not with top-line.
- PAYBACK PERIOD = months until the gross margin from a customer repays their CAC. The single
  most operational number: it is your cash-conversion speed and dictates how fast you can afford
  to grow.
- CONTRIBUTION MARGIN (per unit/order) = price − variable costs (COGS, shipping, payment fees,
  per-order ad cost). If contribution margin per acquisition is negative, growth multiplies losses.
- BREAKEVEN ROAS = 1 ÷ contribution margin %. A 40%-margin product breaks even at 2.5x ROAS; a
  70%-margin info product at ~1.4x. *Why compute it first:* "is 3x ROAS good?" is unanswerable
  without margin — 3x is great at 70% margin and unprofitable at 25%.
</core_definitions>

<healthy_thresholds>
Rules of thumb — starting priors, not laws. Verify against the client's vertical pack
(knowledge/verticals/) and real data.
- LTV:CAC ≥ 3:1 is the classic health floor. Below ~2:1 → the machine loses money after overhead;
  fix offer/retention/CAC before scaling. Above ~5:1 → likely UNDER-investing in growth; the
  constraint is deployment, not efficiency.
- PAYBACK: bootstrapped/SMB wants < 3–6 months (cash is oxygen); funded SaaS tolerates 12; > 18
  is a red flag anywhere.
- The riskiest state: healthy LTV:CAC with LONG payback — profitable on paper, dead on cash. Always
  check both.
</healthy_thresholds>

<scale_gates>
Before recommending "increase spend / scale the winner," ALL must pass:
1. UNIT PROFITABLE: contribution margin per acquisition > 0 at current CAC, or a modeled,
   evidence-based payback the owner explicitly accepts.
2. MEASUREMENT TRUSTED: attribution good enough that you'd bet money on which channel produced the
   customers (skills/measurement-loop). Scaling on mis-attributed data scales the wrong channel.
3. CREATIVE VALIDATED: the asset passed the testing loop (marketing.md <creative_testing_loop>) —
   never scale unvalidated creative.
4. MARGINAL THINKING: expect CAC to RISE with spend (audience saturation, auction pressure).
   Recommend stepped increases (+20–50%, re-measure) not 10x jumps, and state the CAC ceiling —
   the maximum CAC at which the deal still works. *Why:* average CAC hides marginal CAC; the last
   dollar spent is always the least efficient.
5. CASH REALITY: the owner can float the payback window at the new spend level without choking
   operations.
If any gate fails → the recommendation is to fix that gate, not to spend. Say so plainly.
</scale_gates>

<pricing_economics>
Price is the highest-leverage profit variable and the least tested. Encode:
- A price increase flows ~100% to contribution margin; a volume increase flows only margin %.
  Test price before assuming you have a traffic problem (composes with marketing.md
  <value_equation> — usually the offer's perceived value, not the price, is the real issue).
- Raising price REDUCES CAC pressure: higher AOV/LTV affords higher bids, unlocking channels
  competitors can't buy profitably. "Charge more" is often the hidden growth unlock.
- Discounting is margin destruction disguised as marketing: a 20% discount on a 40%-margin product
  requires DOUBLE the volume to hold profit. Prefer value-adds (bonuses, faster onboarding,
  stacked deliverables per <grand_slam_offer>) over price cuts.
</pricing_economics>

<economics_in_the_flow>
Where this file activates in the engagement flow (CLAUDE.md <engagement_flow>):
- INTAKE: capture price, COGS/variable costs, rough churn/repeat rate, current spend. If the
  owner doesn't know margins, help estimate — flagged as estimates.
- DIAGNOSIS: compute the five numbers (CAC blended+paid, LTV, payback, contribution margin,
  breakeven ROAS). They often reveal the true constraint (e.g. "traffic problem" that is actually
  an LTV problem: CAC $80 vs LTV $95 — no channel fixes that; retention/pricing does).
- STRATEGY: every plan states its economic thesis: "spend $X at target CAC ≤ $Y against LTV $Z,
  payback ~N months; kill/iterate if CAC exceeds ceiling after $B spent."
- MEASUREMENT: the loop closes on these numbers, not on impressions (skills/measurement-loop).
<example>
  <good>"Your $49/mo product at 85% margin with 8%/mo churn → LTV ≈ $520. Blended CAC $95 =
  5.5:1 with ~2.3-month payback: you're UNDER-spending. Raise budget in +30% steps while marginal
  CAC ≤ $170 ceiling."</good>
  <bad>"Your ads have 4x ROAS, scale the budget." — Why bad: no margin → 4x may be breakeven;
  no marginal-CAC ceiling; no payback/cash check.</bad>
</example>
</economics_in_the_flow>
