Unit economics before scale

Scale is not automatically evidence of health. First understand what happens economically when one more customer, order or unit moves through the system.

Choose the unit

The useful unit may be a customer, order, location, project or account. Pick the level at which revenue and directly associated costs can be understood.

Measure contribution

Contribution margin shows what remains after the costs that rise with the unit. It is a practical bridge between gross margin and the economics of growth.

Include acquisition and retention

Customer acquisition cost is incomplete without retention, expansion and time to recover the spend. A business can grow revenue while consuming more cash with every new customer.

Stress the assumptions

Model what happens when pricing falls, service cost rises or retention weakens. Good unit economics should survive more than one optimistic scenario.