What Are Unit Economics?
Unit Economics analyze the revenue and costs associated with a single "unit" of business — typically one customer. They answer the most fundamental business question: do you make more money from a customer than it costs to acquire and serve them?
Core Components
| Component | Definition |
|---|---|
| CAC | Total cost to acquire one customer |
| LTV | Total revenue from a customer over their lifetime |
| Gross Margin | Revenue minus direct costs of serving the customer |
| Payback Period | Months to recoup CAC |
The Golden Ratio
LTV:CAC Ratio = Customer Lifetime Value / Customer Acquisition Cost
| LTV:CAC | Assessment |
|---|---|
| > 5:1 | Potentially under-investing in growth |
| 3:1 – 5:1 | Ideal range |
| 1:1 – 3:1 | Inefficient or early-stage |
| < 1:1 | Losing money on every customer |
Building the Unit Economics Stack
Revenue per customer/month: $100
Gross margin: 85% ($85)
Monthly contribution: $85
CAC: $500
Payback period: $500 / $85 = 5.9 months
Average lifespan: 30 months
LTV: $85 × 30 = $2,550
LTV:CAC = $2,550 / $500 = 5.1x
Unit Economics in AI-Run Companies
AI-run companies dramatically reshape unit economics by collapsing the cost side. Traditional SaaS might spend $15-30 per customer per month on support, success management, and infrastructure. AI-run equivalents might spend $0.50-3.00 on model inference costs for the same service.
This means AI-run companies can be profitable at lower price points, reach profitability faster, and sustain higher LTV:CAC ratios. A company on EvolC with strong unit economics and AI operations is effectively a compounding machine — each new customer adds almost pure profit.