Unit Economics

The revenue and cost of a single unit of your business, usually one customer, boiled down to whether that unit makes or loses money. CAC, LTV, and margin all feed into it.

Why it matters

A business with broken unit economics gets worse as it grows, not better. Proving that one customer is profitable, before you pour money into acquiring millions, is how you tell a real business from a subsidised one.

For example

A customer costs 5,000 to acquire and delivers 42,000 in lifetime value, unit economics that clearly work at better than 8 to 1.

Go deeper

SaaS Metrics 2.0 For Entrepreneurs · guide Builds unit economics up from first principles, CAC, LTV, payback, margins, with the charts that make each one click. Open forentrepreneurs.com →

The SaaS Metrics That Matter David Sacks · article An operator's shortlist of the metrics that actually decide whether the unit economics work, cutting through the dozens you could track. Open sacks.substack.com →

Related terms

Also in Starting Up

See how founders actually handle this on Money, pricing and metrics, part of the Starting Up hub.

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