Definition
The direct revenues and costs associated with a single customer or transaction, used to judge whether the business model is fundamentally profitable.
Why it matters for growth
Healthy unit economics at a small scale is a precondition for a business becoming profitable at a large scale; broken unit economics only get worse with growth.
Example
A founder discovers that even ignoring fixed costs, each delivery order loses money once fuel and driver pay are included, exposing broken unit economics.
FAQ
- What is Unit Economics?
- The direct revenues and costs associated with a single customer or transaction, used to judge whether the business model is fundamentally profitable.
- Why does Unit Economics matter for growth?
- Healthy unit economics at a small scale is a precondition for a business becoming profitable at a large scale; broken unit economics only get worse with growth.
- What is an example of Unit Economics?
- A founder discovers that even ignoring fixed costs, each delivery order loses money once fuel and driver pay are included, exposing broken unit economics.