finance
Unit Economics
Revenue and cost per single unit (customer, transaction, project). The atom of business viability.
Definition
Unit economics is the profitability of a single unit - one customer, one transaction, one project. The standard B2B service framing: LTV (lifetime value per customer) vs CAC (cost to acquire). When LTV/CAC > 3 and CAC payback < 12 months, the business can scale profitably. When LTV/CAC < 1, every new customer destroys value. Unit economics is the most-overlooked diagnostic in struggling businesses - founders see top-line growth and miss that each new customer is unprofitable.
In your business
- →Calculate unit economics before scaling acquisition spend - growth amplifies whatever the unit math is
- →LTV/CAC ratio above 3 is healthy; CAC payback under 12 months is healthy
- →Decompose by segment - SMB and enterprise often have wildly different unit economics