Unit economics
Unit economics reduces a company to one order. If a single order does not contribute, more orders make the situation worse rather than better.
The calculation
Everything that scales with the number of orders belongs in this line. Rent, software subscriptions and the owner's time do not; they are covered by the total contribution, not by each order.
Where models go wrong
- Returns left out, which flatters categories with high return rates
- Acquisition cost measured across all orders instead of new customers only
- Discounts and vouchers not deducted from the order value
- Shipping charged to customers counted as revenue, but the actual carrier cost forgotten
Reading the result
A positive contribution per order means volume helps. A negative one means every additional order increases the loss, and the fix is in the order itself: the range, the pricing structure, the shipping method or the channel it came from.
Using it in planning
Once contribution per order is known, the break-even volume follows directly, and so does the answer to the only question that matters in a growth plan: how many additional orders a campaign has to produce before it is worth running.