Unit economics measures the revenue and cost associated with a single unit of the business (usually one customer or one order) to see if the core business model is profitable at all, independent of scale.
The core question unit economics answers is simple and brutal: does making one more sale or acquiring one more customer add value or destroy it? A company can grow revenue fast while unit economics are negative, essentially buying growth by losing money on every transaction — a pattern that works only as long as new funding keeps arriving to cover the gap.
CAC, LTV, contribution margin, and payback period are the core building blocks of a unit economics analysis. None of them individually tells the whole story; together they do.
Related terms