Why unit economics matters
Totals hide the verdict: revenue can grow while every order loses money, and the loss scales with the growth. Unit economics answers the founder question before the scaling question: does one more sale fund the business or drain it?
The numbers that compose it
- Contribution margin per order: revenue minus all variable costs
- Customer acquisition cost against lifetime value
- Payback period: how fast acquisition spend returns
- Repeat behavior deciding whether LTV is real or hoped
Questions
What do healthy ecommerce unit economics look like?
First orders at or near contribution break-even, repeat orders solidly profitable, and acquisition paying back within months rather than years. The exact ratios vary by category; the direction, each cohort worth more than it cost, doesn’t.
When do unit economics justify scaling?
When they hold at the margin: the next thousand customers, at rising ad costs, still returning more than they cost within a survivable payback. Scaling on blended averages while marginal costs climb is how growth kills companies.