Evaluate market sustainability
Posted: Tue Mar 18, 2025 8:53 am
In the early stages of a startup's business development, founders rely heavily on Unit Economics, as they need to analyze the potential of a particular product or service in order to enter the market.
Common Mistakes in Unit Economics
It's not common for startup founders to have a deep mom database understanding of unit economics. There are three very common mistakes they, along with investors, often make when analyzing unit economics.
Fixed vs Variable Costs
One of the most common mistakes people make when performing unit economics analysis has to do with factoring costs into the equation. The rule is simple: Unit Economics only considers variable costs, not fixed costs.
However, in everyday practice, distinguishing between these two types of costs is not such a simple task. Variable costs are those directly associated with sales and vary depending on production volume. An example is the cost of goods sold, such as a product, shipping, or new packaging.
While some costs are clearly variable, others are less so, such as providing service to a customer. In many startups, the availability required for a customer to speak with a sales representative is critical.
Common Mistakes in Unit Economics
It's not common for startup founders to have a deep mom database understanding of unit economics. There are three very common mistakes they, along with investors, often make when analyzing unit economics.
Fixed vs Variable Costs
One of the most common mistakes people make when performing unit economics analysis has to do with factoring costs into the equation. The rule is simple: Unit Economics only considers variable costs, not fixed costs.
However, in everyday practice, distinguishing between these two types of costs is not such a simple task. Variable costs are those directly associated with sales and vary depending on production volume. An example is the cost of goods sold, such as a product, shipping, or new packaging.
While some costs are clearly variable, others are less so, such as providing service to a customer. In many startups, the availability required for a customer to speak with a sales representative is critical.