Unit Economics
The revenue and costs associated with a single unit of your business (usually one customer).
Definition
Unit economics analyzes profitability at the individual customer level. The core question: does each customer generate more revenue than they cost to acquire and serve? Key metrics include LTV, CAC, LTV:CAC ratio, gross margin per customer, and payback period (months to recoup CAC). Positive unit economics means your business model is fundamentally sound.
Why it matters for founders
You can't grow your way out of bad unit economics. If you lose $5 on every customer, getting more customers just means losing money faster. Investors scrutinize unit economics because they determine if the business can ever be profitable.
Example
CAC: $300. Monthly revenue: $80. Gross margin: 75%. Monthly gross profit: $60. Payback period: 5 months. Average customer stays 24 months. LTV: $1,440. LTV:CAC: 4.8x. Unit economics are strong.
How Foundra helps
Foundra's Pricing & Packaging card in the Build phase helps you model unit economics before launch, so you don't build a business that loses money on every sale.
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Related terms
Customer Acquisition Cost (CAC)
The total cost to acquire one new customer.
Lifetime Value (LTV)
The total revenue a customer generates over their entire relationship with your business.
Burn Rate
How fast your startup is spending cash each month.
Monthly Recurring Revenue (MRR)
The predictable revenue your business generates every month from subscriptions.
Break-Even Point
The point where your total revenue equals your total costs, resulting in zero profit or loss.
Contribution Margin
The amount each sale contributes toward covering fixed costs and generating profit.