The Truth About Unit Economics

Unit economics.

They are the recent rage.

Why?

Because there was a Tech bubble.

And in that bubble, company valuations were based strictly on revenue metrics.

This led B2B & B2C startups to buy lots of users at a high price.

It really benefited Facebook and Google, that's for sure.

Now, Tech companies are being valued by profitability metrics.

You know, like what a real business needs to do, make profits.

So VCs tell their portfolio companies: "Make the unit economics work!"

This, in essence, is correct, but lots of people don't really understand it; let me explain.

The "easy" way to try to achieve better unit economics is to adjust your target audience from an individual user to a group setting.

But, as we saw, even B2B startups that are already selling to group-oriented prospects are being told to work on the unit economics aspect.

The truth is not there. The truth is this:

*Unit economics doesn't mean anything.

*If you look at almost all of the profitable SaaS companies, they have focused on two things to become profitable:

1. Building a super strong brand (PR + Organic Social Dominance)

2. Having a product-led growth method (AKA having a truly awesome product)

Up and coming startups need to understand this and learn from this.

Don't overpay for users.

Build a true and consistent brand.

Consistently improve your product.

And don't let FOMO distract you from your main focus.



Do you agree?