What are Unit Economics?
What is it?
Unit economics is the direct revenues and costs associated with a particular business model expressed on a per-unit basis. Simply put: How much profit do you make on a single order? It strips away your rent, software subscriptions, and salary to answer one question: Does selling this product actually make money?Why is it important?
Many beginners focus on 'Total Sales' (Revenue). But if you lose $2 on every t-shirt you sell, selling 1,000 t-shirts just means you lost $2,000 faster. Unit economics is your reality check. If the math doesn't work for one unit, it won't work for a million.How to Calculate It (The Napkin Math):
Selling Price minus COGS (Product + Shipping) minus Transaction Fees minus Ad Cost per Sale = Unit Profit.
Real-Life Example
You sell a mug for $20. The mug + shipping costs you $12. Transaction fees are $1. You spent $5 on Facebook ads to get that sale.
Math: $20 - $12 - $1 - $5 = $2 Profit.
If you didn't account for the ad cost, you might think you made $7. That's a dangerous difference.
❌ Do's and Don'ts
- Do: Be pessimistic with your cost estimates. Always round costs up and profits down.
- Don't: Ignore your time. While not always in the basic formula, realize that if the profit is $1, you are working for pennies.
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Curriculum: 7.2 - Calculating Your True Costs & Profit Margins (Unit Economics) (Difficulty: Beginner | Path: Launch)
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