Unit Economics Glossary for Startups

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Unit Economics

Break-Even Point

The point where total revenue equals total costs, meaning the business is neither profitable nor losing money.

Unit Economics

Burn Multiple

A capital efficiency metric showing how much cash is burned to generate each dollar of new annual recurring revenue.

Unit Economics

CAC (Customer Acquisition Cost)

The total cost of acquiring a new customer, including all marketing and sales expenses divided by the number of new customers acquired.

Unit Economics

COGS (Cost of Goods Sold)

The direct costs of producing and delivering your product or service, subtracted from revenue to calculate gross profit.

Unit Economics

Contribution Margin

The amount each sale contributes toward fixed costs and profit after subtracting variable costs directly tied to that sale.

Unit Economics

Efficiency Score

The ratio of net new ARR to sales and marketing spend, measuring how efficiently growth investment converts to revenue.

Unit Economics

Gross Margin

The percentage of revenue remaining after subtracting direct costs of delivering the product, before operating expenses.

Unit Economics

Hype Ratio

The ratio of company valuation to annual revenue, showing how much valuation is based on future expectations versus current performance.

Unit Economics

LTV (Lifetime Value)

The total revenue a business expects to earn from a customer over the entire duration of their relationship.

Unit Economics

Payback Period

The time required to recover customer acquisition cost from the gross margin a customer generates.

Unit Economics

The analysis of revenue and costs at the individual customer or transaction level, determining whether each customer is profitable.

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