Unit economics

Whether one sale, one customer or one job makes money once everything it costs is counted.

What it means

Unit economics is the profit and loss account of a single unit — one customer, one subscription, one job, one product. Revenue from that unit, minus everything it costs to win and to deliver.

Why it matters

If a single unit loses money, more of them lose more money. Growth makes a bad unit economic worse, and it does it faster.

This is the question that sits underneath "should we spend more on marketing?" If a customer costs £300 to acquire and contributes £200 over their lifetime, the answer is no, whatever the growth chart says.

What it looks like in practice

The two figures that matter for most businesses are customer acquisition cost and lifetime value. The commonly quoted target is an LTV to CAC ratio of at least 3:1, with the acquisition cost recovered within a year.

For a job-based business the equivalent is the true cost of an average job, including quoting time, travel, snagging and the jobs you quoted and did not win.

What to watch out for

Excluding the cost of sales you did not make. If you quote five jobs to win one, the cost of the four losses belongs in the economics of the one you won.

Averages that hide two different businesses. Small jobs and large jobs often have opposite economics, and the blended figure looks fine while one of them quietly loses money.

Where to get proper advice

An accountant can build this from your existing data. The exercise is usually more valuable than the number.