Unit Economics Calculator
Analyze profitability on a per-unit basis to understand revenue, cost, and profit efficiency for merchants, users, and transactions.
Purpose
This calculator helps you:
- Understand which customer segments are profitable
- Evaluate pricing strategy and COGS management
- Identify scaling constraints
- Optimize cost structure
- Validate unit economics assumptions
Interactive Calculator
Scenario Presets
Custom Inputs
Profitability Metrics
Per-Unit Economics
| Metric | Per Merchant | Per User | Per Transaction |
|---|---|---|---|
| Revenue | $500.00 | $10.00 | $3.33 |
| Operating Cost | $200.00 | $4.00 | $1.33 |
| Unit Economics | $300.00 | $6.00 | $2.00 |
Unit Economics Summary
- ✅ Merchant economics healthy: Each merchant contributes $300.00 in profit after operating costs.
- ✅ User economics positive: Each user generates $6.00 in profit.
- ✅ Excellent gross margin: 85.0% indicates strong pricing/efficiency.
- ✅ Exceptional profitability: 45.0% net margin is exceptional.
How to Use
1. Load a Preset Scenario
Click Pilot, Growth, or Scale to see realistic unit economics at different company sizes.
- Pilot: Small operation with tight unit economics
- Growth: Mid-stage with improving margins
- Scale: Large operation with efficient unit economics
2. Adjust Custom Inputs
- Monthly Revenue: Total revenue (5K - 500K range)
- Active Merchants: Number of paying merchant customers
- Active Users: Total registered users (all merchants' users combined)
- Monthly Transactions: Total transactions processed
- COGS %: Cost of goods sold as % of revenue (payment processing, infrastructure, etc.)
- Operating Costs: Salaries, rent, marketing, fixed overhead
3. Read Results
Profitability Metrics
- Gross Profit: Revenue minus COGS (margin % shown)
- Net Profit: Gross profit minus operating costs (margin % shown)
Per-Unit Economics Table
Shows revenue, cost, and unit profit for three dimensions:
- Per Merchant: How much each merchant contributes
- Per User: How much each user generates
- Per Transaction: How much each transaction produces
Unit Economics Summary
Smart insights on:
- ✅ Merchant/user unit economics (positive = each contributes profit after overhead)
- ⚠️ Warnings if unit economics are negative
- ℹ️ Gross margin health (80%+ is excellent, 50%+ is healthy)
- ℹ️ Net margin assessment (30%+ is exceptional, 10%+ is solid)
Key Concepts
Gross Margin
Revenue - COGS = Gross Profit
% of revenue left after direct costs (payment processing, server infrastructure, delivery).
Healthy benchmarks:
- 80%+: Software/digital products (minimal COGS)
- 50-80%: SaaS platforms (some infrastructure costs)
- 30-50%: Physical goods (material costs)
Lantern target: 85%+ (digital marketplace, low COGS).
Net Margin
Gross Profit - Operating Costs = Net Profit
% of revenue left after ALL costs (salaries, marketing, rent, etc.).
Benchmarks:
- > 30%: Exceptional (venture-scale)
- 10-30%: Healthy (sustainable)
- 0-10%: Breakeven area (growth focus)
- < 0%: Operating at a loss
Lantern target at scale: 20-30% (balance growth investment with profitability).
Unit Economics
Per-unit profit = Per-unit revenue - Per-unit cost
Example:
- Each merchant generates 1,650/year revenue (165/month × 10 months)
- Operating costs / merchants = cost per merchant
- If cost per merchant < per-merchant revenue, the unit is profitable
Key insight: Even if overall company is profitable, some units might be unprofitable. Identify and fix.
Customer Payback Period
How long it takes to recoup operating costs for a customer.
If a merchant costs $85 to serve annually (operating cost allocated) and generates $165/month (ARPU), payback is:
$85 cost ÷ $165/month revenue = ~6 weeksQuick payback (< 3 months) = strong unit economics. Long payback (> 6 months) = risky.
Scenarios Explained
Pilot Phase
Metrics:
- $5K/month revenue, 10 merchants, 500 users
- 20% COGS (higher due to % fees)
- $5K operating costs (founder salary or contractor)
Unit Economics:
- Per-merchant revenue: $500
- Per-merchant cost: $500
- Merchant unit econ: Break-even
- Per-user cost: $10
- User unit econ: Very tight
Insight: Early stage, barely profitable on merchant basis. Focus on retention and scale to improve.
Growth Phase
Metrics:
- $50K/month revenue, 100 merchants, 5K users
- 15% COGS (economies of scale)
- $20K operating costs
Unit Economics:
- Per-merchant revenue: $500
- Per-merchant cost: $200
- Merchant unit econ: +$300 profit (strong)
- Per-user profit: $6
- Per-transaction: +$3 profit
Insight: Clear profitable unit economics. Each merchant and user contributes to the bottom line.
Scale Phase
Metrics:
- $300K/month revenue, 500 merchants, 30K users
- 12% COGS (infrastructure efficiency)
- $80K operating costs
Unit Economics:
- Per-merchant revenue: $600
- Per-merchant cost: $160
- Merchant unit econ: +$440 profit (very strong)
- Per-user revenue: $10
- Per-transaction: +$2.40 profit
Insight: Excellent unit economics at scale. Fixed costs are now negligible per unit.
How to Use for Decision-Making
Test Pricing Decisions
Question: "Should we lower ARPU from $165 to $150?"
- Adjust merchant count up (model more merchants at lower price)
- Lower ARPU in pilot revenue calculator
- Compare unit economics before/after
- If per-merchant profit drops below breakeven, price cut is risky
Evaluate New Markets
Question: "Can we afford to enter a new geography with higher CAC?"
- Model increased operating costs (marketing budget)
- Assume same COGS, merchants, users
- Check if net profit stays positive
- If unit economics remain healthy, expansion is feasible
Optimize Cost Structure
Question: "Where should we cut costs?"
- Run baseline scenario
- Adjust operating costs down by 20%
- Observe impact on net margin
- For best ROI, focus on high-impact areas (salaries, infrastructure)
Pricing Strategy
Question: "Can we increase ARPU from $165 to $200?"
- Check gross margin impact (higher revenue, same COGS)
- Model potential merchant churn (fewer merchants at higher price)
- Compare total net profit with Pilot Revenue Calculator
- If profits are higher despite lower merchant count, price increase is justified
Common Questions
Q: What's a healthy COGS %?
A: For Lantern (digital marketplace):
- Pilot: 20-25% (includes payment processing fees + cloud costs)
- Growth: 12-18% (improved scale and negotiated rates)
- Scale: 8-12% (infrastructure efficiency, dedicated deals)
Target: Continuously improve as you scale.
Q: Why does per-user unit economics matter?
A: Users don't directly pay, but they drive transaction volume. High per-user cost with low per-transaction revenue = unprofitable user base.
Q: If per-merchant unit econ is negative, what do we do?
A: Either increase ARPU (pricing or upsell), reduce per-merchant cost (ops efficiency), or exit that segment.
Q: What's the relationship between merchant and user unit econ?
A: They're related but different:
- Merchant unit econ: Is the customer contract profitable?
- User unit econ: Are users driving enough transaction value?
Both must be positive for overall profitability.
Integration with Other Docs
- ECONOMICS.md — Cost structure breakdown
- PILOT_REVENUE_CALCULATOR.md — Revenue projections (feed into this calc)
- FUND_ALLOCATION.md — How unit profits are allocated
Last Updated: 2026-01-11