Unit Economics
Definition
The fundamental profitability of acquiring and serving one customer. Good unit economics mean you make money on each customer; bad means you lose money at scale.
Related terms in Metrics
All 100 terms →Customer Acquisition Cost (CAC)
How much you spend to get one new customer. Includes marketing, sales, and related costs. A sustainable business needs CAC significantly lower than customer lifetime value.
Lifetime Value (LTV)
The total revenue you expect from a customer over their entire relationship with you. Healthy businesses typically have LTV at least 3x higher than CAC.
Monthly Recurring Revenue (MRR)
Predictable revenue you receive every month from subscriptions. MRR is the heartbeat metric for SaaS businesses—watch it religiously.
Annual Recurring Revenue (ARR)
MRR multiplied by 12. ARR is the standard way to express the size of subscription businesses and is the basis for many SaaS valuations.
Churn
The rate at which customers leave. Monthly churn of 5% means you lose half your customers yearly. Reducing churn is often easier than acquiring new customers.