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What are Unit Economics?

Updated: Feb 28, 2021

Unit economics measure profitability of each unit you sell of your product or service.

unit economics contribution margin
fig. 1: unit contribution margin

A "unit" can be defined as 'one item sold', or a 'customer' - depending on your business model.

The point of unit economics is to understand how much profit your business makes before fixed costs, so you can estimate how many units your business needs to sell to cover all costs.

unit economics breakeven analysis
fig. 2: breakeven analysis

Thus unit economics are a fundamental part of breakeven analysis.

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