Unit Economics

The direct revenues and costs tied to one unit of your business, usually a single customer. They tell you whether each customer makes or loses money, through metrics like CAC, LTV, and contribution margin.

Because a company can grow revenue fast and still die if every customer is sold at a loss. Healthy unit economics mean growth compounds in your favor; broken ones mean scaling accelerates losses. Investors check them first.

An LTV:CAC ratio of about 3:1 or higher, a CAC payback period under roughly 12 months, and a positive contribution margin per customer. Together they show each customer is worth more than they cost.

Raise prices, cut acquisition cost, reduce churn to lift LTV, and improve gross margin by lowering variable costs. Retention is usually the highest-leverage lever, and small improvements compound.

Once you have early product-market fit and want to scale. Before fit, the numbers are too noisy to trust. After fit, broken economics are the thing that quietly kills growth.

The revenue from a customer minus the variable costs to serve them. It shows how much each sale contributes toward fixed costs and profit. Negative contribution margin means you lose money on every customer.