Unit economics: margin per unit, LTV and an example
Unit economics describes the revenue and costs attributable to one unit of the business: an order, a customer or a licence. The article shows how to choose the unit, calculate contribution margin and customer lifetime value, and compare them with acquisition cost, using the examples of an online shop and a SaaS company.
Amounts and values in the examples are illustrative and show how the calculation works. In projects, we use the client's data.
Dominik Dębski · Lemur Media · · reading time: 4 min
Reviewed by Dominik Dębski, 1 November 2026
What are unit economics?
Unit economics is a calculation of revenue and variable costs per repeatable unit of sale that shows whether each additional sale increases the company's profit. The unit can be an order in e-commerce, a customer in a subscription model, a transaction on a platform or a project in a services firm. If the margin per unit is negative, sales growth increases the loss. Customer acquisition cost and its payback period are covered in a separate article; here we focus on unit margin and customer value.
How do you choose the unit of analysis?
The unit is the smallest repeatable element for which the company is paid and to which variable costs can be linked. A poor choice of unit hides losses: the average margin per customer can be positive even though half the orders are loss-making.
| Business model | Typical unit | Main variable costs |
|---|---|---|
| E-commerce and D2C | Order, and as a second step the customer | Goods, shipping, payments, returns |
| B2B SaaS | Customer (account) per month | Infrastructure, support, onboarding, commissions |
| Marketplace | Transaction | Payments, dispute handling, subsidies for each side |
| B2B services | Project or hour of work | Project team salaries, subcontractors |
| Manufacturing and distribution | Product or pallet | Materials, energy, logistics |
Many companies run the analysis at two levels: first the margin per transaction, then customer value over time. The first level shows whether a single sale is profitable, the second whether acquiring customers pays off.
How do you calculate contribution margin per order?
From the net revenue of an order, subtract all costs that arise only because the order was placed. Example of an online shop:
| Item per order | Amount |
|---|---|
| Average net order value | PLN 200 |
| Cost of goods | − PLN 110 |
| Gross margin | PLN 90 |
| Payment fees (2%) | − PLN 4 |
| Shipping | − PLN 15 |
| Picking and packing | − PLN 9 |
| Returns (average cost per order) | − PLN 6 |
| Contribution margin | PLN 56 (28%) |
A 45% gross margin looks good, but after fulfilment costs 28% remains. Free delivery or a higher return rate can cut the contribution margin by several points without any change in price.
How do you calculate customer value and compare it with acquisition cost?
Customer lifetime value (LTV) is calculated from contribution margin, over a limited time horizon. If a shop customer places an average of 2.5 orders over 24 months, their value is 2.5 × PLN 56 = PLN 140. With an acquisition cost of PLN 90, the LTV to CAC ratio is 1.56, and each customer leaves PLN 50 to cover fixed costs.
| Model | Calculation | LTV | CAC | LTV ÷ CAC |
|---|---|---|---|---|
| Shop, 2.5 orders | 2.5 × PLN 56 | PLN 140 | PLN 90 | 1,56 |
| Shop, 3.2 orders | 3.2 × PLN 56 | PLN 179.20 | PLN 90 | 1,99 |
| SaaS: PLN 1,000 per month, 80% margin, 2% monthly churn (simplified version with no horizon, overstates the result) | 1 000 × 0,8 ÷ 0,02 | PLN 40,000 | PLN 12,000 | 3,33 |
In "SaaS Metrics 2.0", David Skok notes that the best SaaS companies have an LTV to CAC ratio above 3. This is a guideline for subscriptions. In e-commerce, the more common question is after how many orders the acquisition cost is recovered.
Which lever has the strongest effect?
A sensitivity analysis shows the strongest lever: change each parameter by the same percentage and compare the impact on margin per customer. In the shop example, a 10% increase in orders (from 2.5 to 2.75) raises LTV by PLN 14, while a 10% reduction in CAC improves the result by PLN 9. That is why, in a shop with low repeat purchasing, retention activities usually deliver more than optimising acquisition campaigns. The analysis is repeated separately for each acquisition channel, because customers from different channels have different repeat purchase rates and different acquisition costs.
What are the common mistakes?
- Calculating LTV from revenue instead of contribution margin.
- LTV with no horizon limit: with a very low churn rate, the formula produces values that cannot realistically be recovered.
- A single CAC for all channels, which hides unprofitable channels.
- Leaving discounts, returns and customer service costs out of the unit margin.
- Comparing LTV with an average CAC from a different period than the customer cohort.