evenue traction and revenue growth rate are 2 important factors of your startup. Unit economics determines how much burn will happen. There are so many methods in which people "calculate" unit economics. The definition of unit varies from industry to industry. Should I treat one number of product as one unit or one customer as one unit and the debate goes on.

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You incur cost on production of the product, marketing product or service, selling the product, storing, transporting, etc. As a CFO, the person will know overall cost for the company at high level globally. But how to translate to one unit of a car, if it is a car manufacturing company?

Different types/groups of the same item

You cannot put a big sum and then do a big average. It will always give a skewed result. Better to divide the product and service lines and calculate the sums and averages separately for each of those lines. But marketing and selling expenses may be common! So, you need to have a way to apportion the SnM cost over different lines.

Definition of unit over time

For 7 years, the company would have used one definition of unit and suddenly it would have changed. Your company acquires another company of very similar product but units are different. So a normalization across the unit definition is a must. This cannot vary for a decade, because branding and selling cycles may cover a decade to achieve big targets.

Currency variations in short term and long term may alter this number if you deal with international sales. Adopt a method to monitor the change of currency parameter and the unit economics of products.
Seasonal adjustments

For various reasons, your pricing and promotion may be so different from one quarter to another. There are standard methods to arrive at seasonal averaging of the fundamental numbers.

A very simple indicator. Your bank balance. If it is positive, it indicates, that you have got this right!

Oct 1, 2019

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