The revenue and cost of serving one unit of your business — one customer, one product, one order — the metric that separates scalable companies from cash-burning ones.
How to apply unit economics
- Calculate CAC: total acquisition spend ÷ new customers
- Calculate LTV: average revenue per customer × retention period
- Compare LTV:CAC — healthy is 3:1 or better
The #1 mistake to avoid
Averaging across all customers hides the segments that lose money.
The metric that matters
Frequently asked questions
What is unit economics?
The revenue and cost of serving one unit of your business — one customer, one product, one order — the metric that separates scalable companies from cash-burning ones.
Why does unit economics matter for my business?
Because it directly affects how well your business performs — get it wrong and it costs you in measurable ways. Done right, it becomes a competitive advantage.
How do I apply unit economics?
Start with the practical steps: Calculate CAC: total acquisition spend ÷ new customers; Calculate LTV: average revenue per customer × retention period; Compare LTV:CAC — healthy is 3:1 or better. The key is to start small, measure, and expand what works.
What is the most common mistake with unit economics?
Averaging across all customers hides the segments that lose money.
IDAP Finance Division
This glossary entry is maintained by the IDAP Finance division — specialists who deliver this capability on demand to businesses worldwide.