What are unit economics?
Quick answer
Unit economics are the revenue and costs tied to one unit of what you sell, such as one product or one customer. For a product, the simplest version is price minus the cost to make one unit, which gives the gross profit per unit and the gross margin.
Last updated
Take the free module →Module 2 of the free Runable for Entrepreneurs: Your One-Person Team course, about 10 minutes. No account needed.
Updated · By Robert Breen
Why it matters for a small business
If the cost per unit is wrong, everything built on it is wrong: the price, the margin, how much stock a budget buys, and whether the business can grow. It is the first number a lender or investor checks.
Harbor & Pine unit economics (made-up example)
| Line | Math | Result |
|---|---|---|
| Materials per candle | $1,000 ÷ 60 candles | $16.67 |
| Gross profit per candle | $30 − $16.67 | $13.33 |
| Gross margin | $13.33 ÷ $30 | 44% |
Materials only, before market fees, shipping and labor. From Runable's corrected plan in the business plan lesson.
In a real lesson: Turn Your Research into a One-Page Business Plan using Runable
In the Runable business plan lesson, the first draft said about $9 of materials per candle and a 70% margin. Its own budget put $1,000 of materials into 60 to 80 candles, which is $12.50 to $16.67 each. Asked to fix it and show the math, Runable added a unit economics table with a 44% margin at 60 candles.
Try this lesson free or read the step-by-step guide.
Common confusions
Unit economics vs a budget
A budget is the total you plan to spend. Unit economics divides it by what you make, to show the cost and profit on each unit.
Tips
- Divide the budget by the quantity yourself.
- Say what the margin includes and leaves out.
- Use real supplier quotes, not estimates, before you order.
Related terms
More Business terms
Where you use it: free lessons
- Turn Your Research into a One-Page Business Plan using Runable (Runable, 10 min)
Frequently asked questions
- What is the difference between unit economics and gross margin?
- Unit economics is the full picture for one unit: price, costs and profit. Gross margin is one result from it: gross profit divided by price.
- Can AI calculate unit economics for me?
- It can draft them, but check the math. In our test Runable's first plan said $9 a candle when its own budget meant $16.67.