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Lesson 9: Conducting a Unit Economics Analysis

· 2 min read
Max Kaido
Max Kaido
Architect

Lesson 9: Conducting a Unit Economics Analysis​

Objective​

To evaluate whether your project's unit economics are viable based on your earlier work. This involves calculating contribution margin by comparing your average check (revenue per unit) against variable costs, including the Customer Acquisition Cost (CAC). You'll also factor in fixed and initial costs to assess overall sustainability.

Steps to Conduct Unit Economics Analysis​

  1. Review Key Data

    • Average Check: Revenue generated per unit (defined in Lesson 6).
    • CAC: Customer Acquisition Cost (calculated in Lesson 8).
    • Variable Costs: Additional costs per unit, such as:
      • Taxes or transaction fees.
      • Payment processing fees (e.g., 2–5% of revenue).
      • Direct costs of production or delivery (e.g., materials, salaries for fulfillment).
    • Fixed Costs: Regular expenses like rent, team salaries, and software subscriptions.
    • Initial Costs: One-time setup expenses, such as business registration or development costs.

  2. Calculate Contribution Margin

    Formula: Contribution Margin = Average Check - Variable Costs

    • If the result is positive, your unit economics are potentially viable.
    • If negative, revisit your assumptions or explore ways to reduce costs or increase revenue.

  3. Summarize Findings

    • Clearly state:
      • Average Check (e.g., 10,000 rubles).
      • CAC (e.g., 5,000 rubles).
      • Contribution Margin (e.g., 3,000 rubles).
      • Whether the economics work based on your estimates.

  4. Adjust for Fixed Costs

    • To achieve profitability, your contribution margin must cover fixed costs over time.
    • Break-even point = Fixed Costs ÷ Contribution Margin per Unit.

Example Calculation​

Assumptions​

  • Average Check: 10,000 rubles.
  • CAC: 5,000 rubles.
  • Variable Costs:
    • Taxes and transaction fees: 1,000 rubles.
    • Fulfillment costs: 2,000 rubles.
  • Fixed Costs: 200,000 rubles/month (office, team salaries).
  • Initial Costs: 500,000 rubles (app development, registration).

Contribution Margin​

  • Revenue: 10,000 rubles.
  • Variable Costs (CAC + others): 5,000 + 1,000 + 2,000 = 8,000 rubles.
  • Contribution Margin: 10,000 - 8,000 = 2,000 rubles.

Economics​

  • Contribution margin is positive, so the unit economics work in theory.
  • Break-even Point: 200,000 ÷ 2,000 = 100 units/month to cover fixed costs.

Documentation Format​

  1. Unit Economics Analysis

    • Average check
    • CAC
    • Variable costs
    • Contribution margin
    • Fixed and initial costs (if applicable)

  2. Summary

    • State whether the economics are viable
    • Include key metrics and assumptions
    • Document any areas needing further research or validation

Let me know if you'd like a template for your calculations or help with cost assumptions!