How to Form an LLC in New York: Step-by-Step Guide for 2025
Learn how to form an LLC in New York with this expert 2025 guide. Covers filing, costs, taxes, and compliance to protect your business.
Unit economics helps you figure out whether your business is actually profitable at the basic level, per product, per user, or per transaction. Having this insight could save you from scaling a business that isn’t as profitable as you think.
In this guide, we’ll break down what unit economics is, how to calculate unit economics, and how you can use it to build a more sustainable business. Plus, we’ll touch on how keeping costs low, especially for international transactions, can make a huge difference in your unit metrics. We'll also discuss the Wise Business account. The global account that can help your company with all things cross-border.
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Unit economics is just a fancy way of saying: “How much do I earn from each customer or sale, and how much does it cost me to get there?”
The “unit” can be a customer, product, or subscription—whatever makes sense for your business model. What matters is how much profit you make per unit, after factoring in the costs
Understanding this can help you answer questions like:
Here’s the thing: this isn’t just for startups. Businesses of any size can use unit economics analysis to understand their profitability and potential growth.
Let’s say your revenue is increasing every quarter, but you’re still burning through cash. In business, it happens. While it might be manageable in the early days, long term, it’s a problem. Growth without profitability isn’t sustainable. At some point, your unit economics need to get into gear.
Here’s why this matters:
If you want to make smarter business decisions and avoid mistakes, unit economics is where you start.
To really understand unit economics, there are a few key numbers to know. Let’s break them down.
This is how much it costs you to bring in a new customer. Your CAC includes everything from digital ads and influencer campaigns to the salary of your sales team.
Here’s the formula to calculate your customer acquisition cost:
CAC = Sales + Marketing Spend / New Customer Acquired
For example, if you spend $5,000 and get 100 new customers, your CAC is $500.
This looks at how much revenue (or profit) you expect to earn from a customer over the entire time they do business with you.
Here’s a simple formula to use:
LTV = Average Purchase Value x Number of Purchases x Gross Margin
For example, if someone buys $100 worth of products from you every month for one year, and your margin is 50%, their LTV would be $600.
This one is important. The LTV:CAC Ratio compares what you earn from a customer to what you spend to acquire them.¹
For example, if your LTV is $300 and your CAC is $100, your LTV:CAC ratio is 3:1, which is a great position to be in.
This tells you how much money is left after variable costs, like shipping, production, or transaction fees.
Here’s the formula to follow:
Contribution Margin = Revenue - Variable Costs / Revenue
High contribution margins give you more wiggle room. Low ones make growth much harder, especially if your costs increase.
If you’re wondering how to calculate unit economics, start by identifying your “unit.” Is it a product? A subscription? A service?
Once you know what your unit is, follow these steps:
The key is accuracy. If your costs change across markets or customer types, break them down separately. Averages can hide a lot of details and lead to bad decisions.
Running an international business? Then your unit economic analysis needs to include cross-border costs.
Think about it:
International costs, especially hidden ones, can mess with your margins. Things like inflated exchange rates or surprise fees from traditional banks can eat into your profit per unit.
Instead, look for platforms that offer:
When you reduce unnecessary costs, your unit economics improve. Simple as that.
Once you’ve got your unit economics dialed in, here’s what you can do with the information you have:
Decision | Description | |
---|---|---|
Optimize Your Marketing Spend | If your CAC is too high, look for more efficient acquisition channels like referrals, email marketing, or organic search. The lower your CAC, the better your ratio. | |
Improve Customer Retention | The longer a customer sticks around, the higher their LTV. So focus on providing great services, useful content, and re-engagement strategies. | |
Adjust Your Pricing (If Needed) | If your contribution margin is low, it might be time to look at your pricing model. Small increases — when backed with value — can make a big impact. | |
Scale Smarter | A healthy LTV:CAC ratio tells you how fast and far you can grow without running into cash flow issues. |
Sometimes, the best way to understand unit economics is by seeing it in action within real businesses.
Let’s say you have a monthly snack subscription box. Each box costs $10 to produce and ship. You spend $30 in ads to acquire a new customer, and customers stick around for 6 months on average.
Here’s the breakdown:
That gives you an LTV:CAC ratio of 2:1. While it’s not bad, it’s not ideal. You’d likely need to reduce CAC or increase retention to make the model work at scale.
Now let’s say you negotiate lower shipping costs, improve your packaging process, and increase retention to 8 months. Suddenly:
A few small changes lead to big impact.
A productivity app offers a free trial and charges $9/month afterward. Let’s say it costs $20 to acquire a user, but only 10% of users convert to paying customers, and they stick around for 3 months.
That’s a problem. You’re spending a lot to acquire users, but not enough of them are sticking around.
What can you do?
These tweaks aren’t just important for the user experience, but they can transform your unit economics too.
Even smart businesses make these mistakes when dealing with unit economics:
Let’s recap everything with a template you can use for your business.
Metric | Description | Your Numbers |
---|---|---|
CAC | Total spent on marketing/number of new customers | |
LTV | Avg. order value x number of purchases x margin | |
LTV:CAC Ratio | LTV/CAC | |
Contribution Margin | (Revenue - variable costs)/Revenue | |
Break-even Point | CAC/(monthly profit per unit) |
Use this to plug in numbers every quarter. You’ll spot trends faster and be able to act before problems grow.
Pro tip: If your business is expanding globally, consider international transfer fees, FX markups, and payment processor costs. These can sneakily affect your margins.
Unit economics is how you make sure your business model is working today and in the future. Whether you’re trying to impress investors, expand into new markets, or stay profitable, these numbers matter.
If you’re growing internationally, don’t overlook costs like exchange rates and transfer fees.
Want to do your own unit economic analysis? Start with the basics. Track your CAC. Estimate your LTV. Know your margins. And remember, what you don’t track, you can’t fix.
Wise Business can help you save big time on international payments.
Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in currencies.
Signing up to Wise Business allows access to BatchTransfer which you can use to pay up to 1000 invoices in one go. This is perfect for small businesses that are managing a global team, saving a ton of time and hassle when making payments.
Some key features of Wise Business include:
Mid-market rate: Get the mid-market exchange rate with no hidden fees on international transfers
Global Account: Send money to countries and hold balances in multiple currencies, all in one place. You can also get major currency account details for a one-off fee to receive overseas payments like a local
Access to BatchTransfer: Pay up to 1000 invoices in one click. Save time, money, and stress when you make 1000 payments in one click with BatchTransfer payments. Access to BatchTransfer is free with a Wise Business account
Auto-conversions: Don't like the current currency exchange rate? Set your desired rate, and Wise sends the transfer the moment the rate is met
Free invoicing tool: Generate and send professional invoices
No minimum balance requirements or monthly fees: US-based businesses can open an account for free. Learn more about fees here
Source:
*Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
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