What is Unit Economics?
Nexa Consultancy | Startup & Finance Glossary
Unit economics are the direct revenues and costs associated with a particular business model, expressed on a per-unit basis. The "unit" can be a customer, a product, or any other measurable item.
For Startups: Understanding unit economics is fundamental to proving that a business model is viable and scalable. Even if a startup is currently unprofitable overall, it must be able to demonstrate positive unit economics to attract investment.
For SaaS: The most common unit economics for a SaaS business are the Customer Lifetime Value (LTV) and the Customer Acquisition Cost (CAC). A positive unit economic model means that the LTV is significantly greater than the CAC.
Example: A D2C brand's unit is a single product sold. Its unit economics would be the selling price minus all variable costs, including the cost of goods, shipping, and marketing per unit.