Unit Economics
The revenue and costs associated with a single unit of your business, typically one customer.
Definition
Unit economics measures the direct revenues and costs associated with a particular business model expressed on a per-unit basis. It's fundamental to understanding whether your business model can be profitable at scale.
Key Components
- LTV (Lifetime Value): Total revenue from one customer
- CAC (Customer Acquisition Cost): Cost to acquire one customer
- Contribution Margin: Revenue minus variable costs per unit
- Payback Period: Time to recover acquisition cost
Why It Matters
- Scalability: Shows if business model works at individual level
- Investment Decisions: Guides marketing spend and growth strategy