Amey-Thakur Unit economics
Growth multiplies whatever the unit already is. A business with negative unit economics gets worse as it grows, which is why this calculation comes before every growth decision rather than after the first bad quarter.
Method
- Define the unit precisely. One customer, one order, one seat, one delivery. Different units give different answers and only one matches the decision you are making.
- Include every variable cost. Payment fees, support, hosting, fulfilment, and the portion of headcount that scales with volume. Excluding support is the most common way unit economics look good and are not.
- Compute contribution margin first. Revenue per unit minus variable cost per unit. If this is negative, no volume fixes it and nothing else matters.
- Compare lifetime value to acquisition cost honestly. Lifetime value uses contribution margin rather than revenue, and includes real retention rather than an assumed one (see saas-metrics).
- Measure payback period, not just the ratio. How long until an acquired customer repays their acquisition cost decides whether you can fund growth from operations or must raise (see cash-flow-management).
- Segment before concluding. Blended unit economics hide that one channel or customer type is profitable and another is not, which is the actionable finding.
- Re-check as you scale. Economies of scale improve some costs and worsen others, particularly support and sales complexity.
Boundaries
Unit economics describe the current model; a business may rationally run negative early while building something that changes them, which is a deliberate bet rather than an accident. Allocating fixed costs into a unit calculation distorts it. Long payback periods can be sound with patient capital and fatal without it.