Unit Economics

In the early days of a startup, the revenue is small.

Instead of focusing on the absolute size of the revenue, focus on the unit economics of the business.

Unit economics shows your business model on a per-unit basis.

Measure the cost of acquiring each customer and the revenue you receive from the same.

You can calculate the CAC:LTV ratio which is the cost of acquiring the customer and compare it to the lifetime value of the customer. 

You can also calculate the time of payback compared to the cost of customer acquisition.

The faster the payback time, the less capital you will need to raise and, therefore, the more valuable your business will be.

Investors are not looking for big numbers; they are looking for repeatability and predictability of your revenue.

Use unit economics to show how you have built a working business albeit on a small scale.

Emphasize the systems you have in place for acquiring customers, providing a service, and how overall it’s a profitable business.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.