Unit economics
Unit economics refer to the direct revenues and costs associated with a single unit of a product or service. It helps startups understand the financial viability of their business model on a per-unit basis.
What are Unit Economics?
Unit economics focus on the revenues and costs attributed to one unit of a product or service. It enables startups to evaluate the profitability of each product or service sold.
Why Unit Economics Matter
By analyzing unit economics, founders can determine if their business model is sustainable and scalable. It helps in making informed decisions on pricing, marketing strategies, and resource allocation.
Examples of Unit Economics
- Customer Acquisition Cost (CAC): Cost to acquire one customer.Customer Lifetime Value (CLV): Revenue generated from a customer throughout their relationship with the company.
Related Concepts
Unit economics are closely tied to metrics like gross margin, churn rate, and customer acquisition efficiency, offering a deeper understanding of a startup's financial health.