Unit Economics analyze the profitability of a business model at the smallest meaningful unit: a single customer, a single transaction, or a single product. The central question is: Do we make money with each unit, or are we subsidizing growth at the expense of profitability? Without positive unit economics, growth does not lead to profit but to proportionally increasing losses.
The most important metrics are CAC (what does it cost to acquire a customer?), LTV (what does a customer bring over the entire relationship?), Contribution Margin (what remains per unit after variable costs?), and Payback Period (when has the customer acquisition paid for itself?). A delivery service generating 8 euros revenue per order but incurring 12 euros in variable costs loses money with every order. Growth worsens the problem. Only when unit economics are positive does scaling make economic sense.
Unit economics are often negative in early phases, which can be acceptable if a clear path to improvement exists. It becomes problematic when negative unit economics are obscured by growth metrics and the structural unprofitability is not addressed.
