Stages of calculating unit economics
Posted: Mon Jan 20, 2025 8:28 am
There are many manuals on unit economics that specify terms, formulas and abbreviations. However, it is important to remember that each enterprise requires an individual approach and the use of its own formula. Economists have developed four main stages of calculation to obtain up-to-date information on the state of the business. Below is more about each.
Definition of a business unit
It is necessary to choose the right unit. There are two options here:
A unit is a product or service. In such a situation, the profit from one sale is estimated taking into account variable costs. Example. In a cafe, a unit is a dish from the menu. Let's assume that the cost price of a dish is 100 rubles, and its price for visitors is 300. Obviously, the cost price is 200 rubles lower than the revenue. Thus, the cafe is operating in the black.
A unit is a client. The mode twitter databasel involves calculating the profit from a client (LTV) and the cost of attracting them (CAC) with subsequent comparison of these values. Example. A company earns 200,000 rubles per month, having 100 clients. LTV = 200,000 / 100 = 2,000 rubles – each one actually brings in. Advertising costs amounted to 20,000 rubles, and it was possible to attract 50 new clients. CAC = 20,000 / 50 = 400 rubles – spent on the client. Having compared the obtained values, we will see that the profit the company earns from a buyer is much greater than the cost of attracting them. This means that the organization is working in the black.
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Unit Cost Calculation
Unit economics uses a large amount of data to calculate various parameters. The most popular metrics are listed below:
UA – attracted users. Shows how many consumers used the advertising link.
CR – conversion. Tells what number or percentage of customers who visited the site purchased a product or service.
AC – total user acquisition costs or marketing budget.
CPA – cost of attracting one client.
CPA = AC / UA
For example, the marketing budget was 200,000 rubles, 5,000 people visited the website of the online culinary school. In this case, the CPA will be 40 rubles - this is how much the organization spends to attract one client.
Stages of calculating unit economics
Source: Owlie Productions / shutterstock.com
CAC – cost of attracting one client
CAC = Total Acquisition Costs / Number of Clients.
Example. 10,000 rubles were spent on advertising a new course, and third-party specialists were additionally paid: 2,000 rubles to a designer, 1,000 rubles to a copywriter, 2,000 rubles to a targeting specialist. 200 people bought the course. CAC = (10,000 + 2,000 + 1,000 + 2,000) / 200 = 75 rubles.
Calculation of income per unit and user
The costs of the latter are already known, now it is necessary to find out what profit it brings. The following metrics allow you to do this:
APC is the average number of purchases made by one customer.
APC = Number of purchases / Number of buyers
A store selling musical instruments to artists has 200 customers who have made 1,000 purchases. Each customer makes an average of 5 purchases.
AvP – average bill
AvP = Revenue / Number of purchases.
The company sells acoustic and bass guitars for 5,000 and 10,000 rubles, respectively. Let's assume that each type of instrument was sold 20 times.
AvP = (5,000 * 20 + 10,000 * 20) / 40 = 7,500 rub.
COGS – cost of goods sold. Includes only the costs of their production.
The company sold 200 books, and spent 20,000 rubles on their publication. COGS = 20,000 * 200 = 4,000,000 rubles.
ARPC is the average revenue that one customer brings to a company.
ARPC = (AvP – COGS) * APC – 1COGS
1COGS – additional costs for the first sale. This concept is applicable in situations where the company offers bonuses to new customers.
The average bill of a window seller is 100,000 rubles, the cost of goods sold is 50,000, and one client makes an average of 3 purchases. There are no additional costs.
ARPC = (100,000 – 50,000) * 3 – 0 = 150,000 rub.
ARPU is the average revenue generated by one
Definition of a business unit
It is necessary to choose the right unit. There are two options here:
A unit is a product or service. In such a situation, the profit from one sale is estimated taking into account variable costs. Example. In a cafe, a unit is a dish from the menu. Let's assume that the cost price of a dish is 100 rubles, and its price for visitors is 300. Obviously, the cost price is 200 rubles lower than the revenue. Thus, the cafe is operating in the black.
A unit is a client. The mode twitter databasel involves calculating the profit from a client (LTV) and the cost of attracting them (CAC) with subsequent comparison of these values. Example. A company earns 200,000 rubles per month, having 100 clients. LTV = 200,000 / 100 = 2,000 rubles – each one actually brings in. Advertising costs amounted to 20,000 rubles, and it was possible to attract 50 new clients. CAC = 20,000 / 50 = 400 rubles – spent on the client. Having compared the obtained values, we will see that the profit the company earns from a buyer is much greater than the cost of attracting them. This means that the organization is working in the black.
Read also!
"B2B Marketing: Key Features, Promotion Channels"
Read more
Unit Cost Calculation
Unit economics uses a large amount of data to calculate various parameters. The most popular metrics are listed below:
UA – attracted users. Shows how many consumers used the advertising link.
CR – conversion. Tells what number or percentage of customers who visited the site purchased a product or service.
AC – total user acquisition costs or marketing budget.
CPA – cost of attracting one client.
CPA = AC / UA
For example, the marketing budget was 200,000 rubles, 5,000 people visited the website of the online culinary school. In this case, the CPA will be 40 rubles - this is how much the organization spends to attract one client.
Stages of calculating unit economics
Source: Owlie Productions / shutterstock.com
CAC – cost of attracting one client
CAC = Total Acquisition Costs / Number of Clients.
Example. 10,000 rubles were spent on advertising a new course, and third-party specialists were additionally paid: 2,000 rubles to a designer, 1,000 rubles to a copywriter, 2,000 rubles to a targeting specialist. 200 people bought the course. CAC = (10,000 + 2,000 + 1,000 + 2,000) / 200 = 75 rubles.
Calculation of income per unit and user
The costs of the latter are already known, now it is necessary to find out what profit it brings. The following metrics allow you to do this:
APC is the average number of purchases made by one customer.
APC = Number of purchases / Number of buyers
A store selling musical instruments to artists has 200 customers who have made 1,000 purchases. Each customer makes an average of 5 purchases.
AvP – average bill
AvP = Revenue / Number of purchases.
The company sells acoustic and bass guitars for 5,000 and 10,000 rubles, respectively. Let's assume that each type of instrument was sold 20 times.
AvP = (5,000 * 20 + 10,000 * 20) / 40 = 7,500 rub.
COGS – cost of goods sold. Includes only the costs of their production.
The company sold 200 books, and spent 20,000 rubles on their publication. COGS = 20,000 * 200 = 4,000,000 rubles.
ARPC is the average revenue that one customer brings to a company.
ARPC = (AvP – COGS) * APC – 1COGS
1COGS – additional costs for the first sale. This concept is applicable in situations where the company offers bonuses to new customers.
The average bill of a window seller is 100,000 rubles, the cost of goods sold is 50,000, and one client makes an average of 3 purchases. There are no additional costs.
ARPC = (100,000 – 50,000) * 3 – 0 = 150,000 rub.
ARPU is the average revenue generated by one