Glossary · Finance
What is Unit Economics?
Definition
Unit economics is the revenue and cost of a single sale or customer, used to judge whether the business makes money each time it sells.
Contribution per unit = price − variable costs per unit (COGS, delivery, fees)
Why it matters
If the math fails on one unit, selling more units only loses money faster. Work it out before you spend on growth.
Take a meal-prep delivery service that charges $60 per weekly box. Ingredients cost $24, packaging $3, delivery $9, and payment fees $2. That leaves $22 per box. If acquiring that customer costs $40 and they order for an average of 8 weeks, they generate $176 in contribution, a healthy return.
Change one input, such as delivery cost rising to $15, and contribution drops to $16 per box. Small shifts show up quickly when viewed per unit.
Common mistakes
- !Ignoring payment processing, returns, and customer service time when calculating the cost per unit.
- !Assuming volume will fix a negative margin.
Frequently asked questions
What is Unit Economics?
Unit economics is the revenue and cost of a single sale or customer, used to judge whether the business makes money each time it sells.
How do you calculate Unit Economics?
Contribution per unit = price − variable costs per unit (COGS, delivery, fees)
What mistakes do beginners make with Unit Economics?
Ignoring payment processing, returns, and customer service time when calculating the cost per unit. Assuming volume will fix a negative margin.
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