Unit Economics

Definition

Unit economics is the analysis of revenue and costs on a per-unit basis. The “unit” depends on your business: for SaaS, it's usually one customer. For e-commerce, it's one order. For a consulting firm, it's one project. The question is always the same: do we make money on each individual unit, ignoring overhead?

The two core numbers are revenue per unit and cost per unit. The gap between them — the contribution margin — tells you how much each unit contributes to covering fixed costs and generating profit.

Why It Matters

You can't scale your way out of bad unit economics. If you lose $5 on every customer, getting more customers just means losing money faster. This sounds obvious, but plenty of businesses — especially venture-funded ones — grow quickly without confirming that each unit is profitable.

Good unit economics also tell you how much you can afford to spend on growth. If each customer generates $10K in lifetime value and costs $2K to serve, you have $8K of margin to split between acquisition costs and profit. That math directly determines your marketing budget and hiring plan.

Unit economics are also where you find hidden profitability problems. Your blended numbers might look fine, but when you break them down by customer type, product line, or channel, you often find that some units are highly profitable and others are actually losing money. That segmentation is gold.

Example: A meal-kit company sells boxes for $60. Variable costs are $35 (ingredients, packaging, shipping). Contribution margin is $25 per box. If CAC is $80 and the average customer orders 6 boxes before churning, lifetime contribution is $150. LTV:CAC is 1.9:1 — workable but tight. If they can bump average orders to 8, it becomes $200 vs $80, which is much healthier.

Key Components

• Revenue per unit: What you earn from each customer/order/project
• Variable cost per unit: What it costs to deliver each unit (COGS, direct labor, etc.)
• Contribution margin: Revenue minus variable costs
• Customer lifetime value: Total contribution margin over the customer's lifetime

How CentSight Helps

CentSight breaks down your revenue and costs at the unit level using data from your accounting and billing systems. It calculates contribution margin per customer segment, per product, and per channel. Ask “What are my unit economics for enterprise clients versus SMB?” and CentSight shows you the comparison, so you can focus on the segments that actually drive profit.