Profitability
Unit economics
Last reviewedWhat is Unit economics?
Look at the revenue and cost of one unit, such as one order, one store or one customer. For customer businesses, compare customer lifetime value (CLV) with customer acquisition cost (CAC).
When should you use Unit economics?
Growth, start-up, subscription and new-channel cases, and any time a business grows revenue but not profit.
What are its limits?
Averages hide spread: some customers or stores may be very profitable and others loss-making, and fixed costs sit outside the unit view.
How do you tailor it to a case?
Choose the unit that matches the decision (per order for delivery, per store for retail, per customer for subscriptions), then split it by segment.
Where does it come from?
A general finance tool with no single author.
Use a framework as a source of ideas, then put a structure built for this specific problem on the table. Reciting a framework by name is a common way to lose marks.