Unit Economics
Can a business grow quickly and get further from profitability with every sale?
The idea
Unit economics test whether one customer creates or destroys value.
In the real world
Revenue minus service and acquisition costs reveals contribution.
Going deeper
The arithmetic is simple: what one customer pays over their life with you, against what it cost to win them and what it costs to serve them. The difficulty is that the costs are spread across functions and time, so nobody owns the whole number.
The reason it decides strategy is that it tells you what growth does. Where contribution is positive, volume compounds a good thing and scale is the answer to most problems. Where it is negative, every new customer widens the hole, and the business is not underfunded — it is misdesigned. Raising money to grow faster in that state buys a larger version of the same problem.
Where it stops applying
Early-stage numbers are genuinely unreliable: acquisition cost is inflated by learning, and lifetime value is a guess with no long-run data. The discipline is to know which it is, not to demand a clean number too soon.
Why it matters
It lets you tell the difference between a business that needs scale and one that needs a different model.
Try this today
Calculate contribution from one typical sale.
Test yourself
Revenue is doubling year over year, but each customer costs more to acquire and serve than they pay over their lifetime. What does growth do here?
Show the answer
It accelerates the loss. When a single customer destroys value, volume multiplies the destruction; scale only rescues a model where the per-unit contribution is already positive or clearly heading there.
Learn this in the feed Answering from memory, then again days later, is what makes it stick.