Unit economics is the profitability of a single customer or transaction, examined in isolation from the company's overall size, most commonly comparing customer acquisition cost against the revenue and margin that customer generates over time.
A company can be losing money overall while having genuinely strong unit economics, if it simply hasn't yet acquired enough customers to cover its fixed costs, or losing money on every single customer while somehow scaling anyway, a far more dangerous position that's easy to miss without examining the numbers at the individual-unit level.
This is why investors dig into CAC, LTV, gross margin, and payback period together rather than looking at revenue growth alone. A business growing fast on the back of bad unit economics is compounding a problem with every new customer it adds, not fixing one.
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