Unit Economics

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.