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Unit economics measures profitability per customer/transaction. Key metrics: LTV (Customer Lifetime Value) and CAC (Customer Acquisition Cost). Healthy unit economics: LTV:CAC ratio of 3:1 minimum. If LTV is $300 and CAC is $100, ratio is 3:1 (healthy). Negative unit economics means losing money on each customer - unsustainable long-term. Investors scrutinize unit economics to determine if your business model is viable at scale. Calculate before launch using validation tools like IdeaProof.
Key Unit Economics Takeaways
- Unit economics: Profit/loss per customer or transaction
- Healthy LTV:CAC ratio: 3:1 minimum (LTV 3x higher than CAC)
- Calculate: LTV = Revenue per customer - costs to serve
- Negative unit economics = losing money per customer (unsustainable)
- CAC payback period: Should be <12 months
- Essential for fundraising: Investors demand positive unit economics path
Related concepts: ltv cac ratio, customer profitability, unit economics calculation, customer lifetime value, customer acquisition cost, business model viability, startup metrics, payback period, gross margin, contribution margin.