Understanding Unit Economics

Simply put, unit economics are a measure of the profitability of selling, producing, or offering one unit of your product or service. Think of it as unit profitability: Positive unit economics suggest you have a viable product. 

If you're a widget company selling widgets, the unit economics will be a relationship between the revenue you receive from selling a widget and all the costs associated with making that sale. For companies offering a service, Uber for example, the unit economics will be the relationship between the revenue from their service vs. the costs associated with offering and servicing the customer.

The basic goal of unit economics is to understand how much profit a business makes before fixed costs so that one can estimate how much a business needs to sell in order to cover its fixed costs. They are a fundamental part of the breakeven analysis.