The revenue and cost directly associated with a single "unit" of your business — whether that's one product sold, one customer, or one transaction.
Unit economics asks: does your business make money on a single sale, before worrying about scale? If it costs you £80 to acquire a customer who spends £60, your unit economics are broken — you lose money on every customer regardless of how many you acquire. Good unit economics means each transaction is profitable on its own.
Unit Contribution = Revenue per Unit − Variable Costs per UnitUnit economics is the litmus test for business viability. A business with bad unit economics doesn't get better as it scales — it gets worse. Lots of revenue can mask terrible unit economics. The question isn't "are we growing?" but "are we profitable on each thing we sell?"
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A DTC brand has strong revenue growth but keeps losing money. AskBiz calculates unit economics: average order value £45, variable costs per order £28, contribution margin £17. But average CAC is £31 — meaning they lose £14 on every customer acquired through paid channels. AskBiz identifies organic acquisition as the only viable growth channel.
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LTV:CAC is a specific unit economics ratio comparing the lifetime value of a customer to the cost of acquiring them. If LTV:CAC is above 3:1, the business is generally considered economically healthy. Below 1:1, you're losing money on every customer.