How to calculate unit economics
if you don’t have an analyst
Five numbers are enough for unit economics: average order value, margin as a percentage, customer acquisition cost, number of repeat purchases and customer lifetime. All of this is in any accounting system and ad account; you don’t need an analyst for it.
Unit economics answers one question: do you earn money on a single customer or pay extra for them. Until you have the answer, every decision on advertising, pricing and scaling is made blind — and scaling an unprofitable model simply increases the loss.
Five numbers you need to collect
| Number | Where to get it |
|---|---|
| Average order value | Revenue for the period divided by the number of orders |
| Gross margin, % | Subtract direct cost from the order value: goods, delivery, commissions, piece-rate pay. Do not include rent and salaries here |
| Acquisition cost (CAC) | All marketing spend for the period divided by the number of new customers |
| Repeat purchases | How many times on average a customer buys over their lifetime |
| Customer lifetime | How many months on average a customer stays active |
Two formulas are enough
Profit per purchase: average order value × margin − acquisition cost.
Lifetime profit per customer (LTV): average order value × margin × number of purchases − acquisition cost.
That’s it. Everything else is add-ons you need once these two numbers are calculated and don’t add up.
A worked example
A service business: average order value RUB 12,000, gross margin 55%, customer acquisition costs RUB 4,800, a customer buys 2.4 times on average over a year and a half.
- Gross profit per purchase: 12,000 × 0.55 = RUB 6,600
- First purchase: 6,600 − 4,800 = RUB 1,800
- Lifetime: 6,600 × 2.4 − 4,800 = RUB 11,040
- LTV to CAC ratio: 15,840 / 4,800 = 3.3
Less than 1 — you pay more for each customer than they bring in. You can’t scale; you need to fix it.
From 1 to 3 — the model works, but there is no margin of safety: any rise in ad costs takes you into the red.
3 and above — a healthy model with room to grow.
The example came out at 3.3 — fine. But note: the first purchase brings in only RUB 1,800. This means the entire business rests on repeat purchases. If retention slips from 2.4 purchases to 1.5, the model immediately becomes borderline.
Four mistakes that make the calculation look good and be wrong
Calculating a company-wide average
Different channels, products and segments have different economics. The overall average hides both the best and the worst. You need to calculate at least by acquisition channel and by product group — that is exactly where you discover that one channel feeds the whole business while another eats it up.
Dividing advertising by all customers, not just new ones
If repeat buyers end up in the denominator, acquisition cost comes out underestimated several-fold. Only new customers count.
Forgetting hidden costs per deal
Acquiring fees, marketplace commissions, delivery, returns, bonuses for managers. Individually each item seems trivial, but together they make up 5–15% of the order value — that is, a third of the margin in an average business.
Making up LTV
The most common mistake. “Our customers stay with us for years” is checked with a two-year export from the customer base. Usually the real number of repeat purchases turns out to be half of what it feels like.
What to do with the resulting number
If the LTV to CAC ratio is below three, the order of action is: first raise the margin, because that is fastest, then work on repeat purchases, and only last of all reduce acquisition cost. The last is the most labor-intensive and gives the smallest gain.
And one observation from practice. When an owner calculates these five numbers for the first time, what usually comes out is not “everything is bad” but “it’s not where we thought”. The channel considered the best turns out to be unprofitable, and the profit comes from the line they were planning to close.
If you recognize your situation
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