Unit Economics Template

What is a Unit Economics?

A unit economics sheet works out what a single sale or a single customer actually earns you once the cost of delivering it comes off, and how long an acquisition cost takes to come back. It matters because revenue growth tells you nothing on its own: a business can grow quickly while losing money on every order, and this sheet is where that shows up.

Founders raising money, because it is the first thing an investor asks about after the growth chart. Also e-commerce operators deciding whether a discount code is affordable, subscription businesses setting a paid acquisition budget, and service firms pricing a retainer. Finance teams inside larger companies build one per product line or per channel, since a blended average across a whole business hides the segments losing money. It is just as useful for a market stall working out whether the pitch fee is covered.

Whether a figure belongs above or below the line depends on your tax and accounting position. Sales tax treatment differs — VAT in the UK and EU, GST in India, Australia and Canada, state-level sales tax in the US — and it decides whether the price you record is what the customer paid or that figure net of tax, and whether input tax on your costs is recoverable. Accounting standards also govern when acquisition costs may be spread over a contract rather than expensed at once. Set the convention with your accountant, then apply it to every row consistently.

A unit economics sheet says nothing about whether you can pay the rent. It ignores fixed overheads — salaries, premises, software, insurance — by design, so a business with healthy unit economics can still run out of cash. It is not a cash flow forecast either: contribution earned across a two-year customer lifetime does not help with a supplier invoice due on Friday. And it does not predict retention. Every lifetime value figure rests on an assumption about how long customers stay, and that assumption is the least reliable number on the page.

What to put in a Unit Economics

These are the details this template asks for. Anything left blank is marked in red on the preview so you can see what is still missing.

How to write a Unit Economics

1. Decide what one unit means

   One order, one subscriber, one delivery, one seat, one patient visit. Write it at the top of the sheet, because every figure below depends on it and mixing two definitions is the commonest way these sheets go wrong. For subscription businesses the unit is usually the customer; for retail and marketplaces it is usually the order, with repeat purchase handled as a separate line.

2. Take average revenue per unit first

   Use what customers actually paid over a recent period, not the list price. Discounts, promotional codes, refunds and chargebacks all reduce it, and leaving them out is how a sheet flatters the business into a bad decision. Say whether the figure is before or after sales tax and keep that consistent everywhere. Where you sell several products, do this per product before blending.

3. List only the variable costs below

   Costs that rise with each additional unit: goods, packaging, shipping, payment processing fees, per-seat licence costs, delivery driver time, support cost per ticket where it scales. Leave out rent, salaried staff and software you pay for regardless of volume. Revenue minus these is contribution — the amount each sale leaves over to cover everything else in the business.

4. Work out acquisition cost honestly

   Take all the money spent winning customers in a period — advertising, agency fees, sales salaries and commission, referral rewards, the discount given on a first order — and divide by the customers actually won in that period. Excluding sales salaries is common and it makes the number meaningless. Do it per channel where you can, since a blended figure hides the channel that is not working.

5. Compare payback against your cash position

   Divide acquisition cost by monthly contribution to get the number of months before a customer has repaid what you spent winning them. Then check whether you can fund that gap: acquiring more customers means paying up front and waiting. The lifetime value ratio matters less than whether the payback period fits the cash you actually hold in the bank.

Common mistakes

• Using list price instead of what customers really paid, which inflates every figure below it once discounts, refunds and chargebacks are ignored.
• Putting fixed overheads into the variable cost list, which makes contribution look negative and hides the fact that the product itself is profitable.
• Leaving sales salaries out of acquisition cost, producing a payback period far shorter than the one your bank account is experiencing.
• Blending every channel and product into one average, so a channel losing money on every customer is masked by one that is working.
• Assuming a customer lifetime you have no data for, which turns lifetime value into a number that supports whatever spending decision you had already made.

Frequently asked questions

This page explains general practice and is not legal advice. Requirements differ between countries and, in some cases, between states — check what applies where the document will be used.

Related templates

All templates · Management templates