We plan to bring eChai across 100 cities in India. It starts with eChai Startup Demo Day on 26 September, all in person. 11 cities confirmed, 312 founders registered. Any city that reaches 20 interested founders is on too. See your city
Money, pricing & model

What are unit economics and why do they matter?

Unit economics is the profit or loss on a single customer or unit, strip away the noise and ask 'do I make money on one customer?' If the answer is no and there's no clear path to yes, scaling just burns cash faster. Get the unit right first; growth multiplies whatever the unit is, good or bad.

Go deeper

3 resources, 2 link-checked.

📄 Article
✓ Link checked Free Intermediate

The reference primer on the metrics and market-sizing logic investors use, including bottom-up market sizing that keeps founders honest about how big a market really is. Canonical a16z source.

16 Startup Metrics

From a16z by Andreessen Horowitz (a16z) ~15 min read

  • Size markets bottom-up from customer count and willingness to pay
  • Know the metrics that actually signal a healthy business
  • Distinguish real traction from vanity metrics
  • Use consistent definitions when comparing yourself to the market
Open a16z.com →
📄 Article
✓ Link checked Free Advanced

David Skok's For Entrepreneurs work is the foundational, near-universally cited source on SaaS unit economics and modeling. It's where the LTV:CAC and CAC-payback conventions were popularized.

SaaS Metrics 2.0, Detailed Definitions

From forentrepreneurs.com by David Skok long-form reference

  • Unit economics (LTV:CAC and months to recover CAC) reveal long-term profitability
  • Simple LTV formulas break when revenue expands over a customer's lifetime
  • Build financial models from real drivers, not top-down market-share guesses
Open forentrepreneurs.com →
📄 Article
Free Intermediate

A focused a16z piece on the single ratio that most captures a business's efficiency and drives its valuation. Great for founders who need to understand the 3:1 benchmark and its limits.

Why Do Investors Care So Much About LTV:CAC?

From a16z.com by Andreessen Horowitz (a16z) article

  • 3x LTV:CAC is a common rule-of-thumb benchmark for healthy unit economics
  • Higher LTV:CAC drives higher margins and therefore higher valuation
  • The ratio can mislead, CAC payback period matters just as much for cash
Open a16z.com →

Terms in this answer

Unit Economics

People also ask

How do I calculate CAC (customer acquisition cost) and LTV? 3 → What is a good LTV to CAC ratio? 3 → What metrics should I actually track as an early-stage SaaS founder? 3 → How do I build a simple financial model or revenue projection? 3 → What is churn and how much churn is too much? 2 → My CAC looks great but I paid for it with a founder-led discount. How do I know my unit economics without the promo? 2 →

Also in D2C

The same ground, over in Money, pricing & unit economics, our D2C track.

I'm not a finance person, what books/records do I actually need to keep from day one? 3 → What is cohort analysis, and why does it matter more than a single repeat-rate number? 3 →

Also in How Founders Use AI

How founders actually use AI for this, over in Finance & Accounting.

How do founders use AI for bookkeeping, invoicing, runway and burn analysis? 4 → Why build financial models with AI instead of from a blank spreadsheet? 4 →

Also in GTM

The same ground, over in Close deals and price right, our GTM track.

I have a call booked with a real prospect tomorrow. What do I do on it? 4 → I have no idea what to charge. How do I pick a first price? 4 →

Also in Wealth

The same ground, over in Founder money foundations, our Wealth track.

How much should I pay myself as a founder? 2 → How big should my emergency fund be when my income is lumpy? 3 →
eChai Partner Brands