Profitability & Margins
Unit Economics
The revenue and costs associated with a single unit or customer, showing whether each sale is profitable.
What are Unit Economics?
Unit economics break down the profitability of your business at the most granular level — per product sold or per customer acquired. If your unit economics are positive, scaling your business should increase profits. If they're negative, scaling just means losing money faster.
Key Unit Economics Metrics
- Contribution margin per unit: Revenue minus all variable costs per unit
- LTV:CAC ratio: How much a customer is worth vs. how much it costs to acquire them
- Payback period: How long until a customer becomes profitable
Example
Product revenue: $40. COGS: $15. Shipping: $5. Fees: $2. Unit contribution = $18. If marketing cost per sale is $10, net unit profit = $8.
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