Unit Economics: Is Each Customer Profitable?
Unit economics asks if you make or lose money on a single customer or sale. It's used in SaaS to compare customer lifetime value (LTV) to acquisition cost (CAC). The footgun is defining the 'unit' poorly, hiding that each new customer costs you money.
Unit economics zooms in on the revenue and costs of a single 'unit'—like one customer or one item sold—to determine its profitability. SaaS companies use this to ensure Customer Lifetime Value (LTV) exceeds Customer Acquisition Cost (CAC). The biggest footgun is defining the 'unit' too broadly or ignoring variable costs, which can mask an unprofitable business model that loses money with every new sale.
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