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Unit economics: how to know how much you can pay for ads
"A lead costs 25,000 so‘m — is that expensive or cheap?" The numbers in your ad account can't answer that. The answer sits inside your business: how much profit is left from one order, what share of leads become sales, and how many times a customer comes back. The method for working this out is called unit economics. It shows how much you can pay for advertising and when to raise the budget or stop. This article walks through unit economics with a simple example in so‘m.
What unit economics is
Unit economics means calculating the business at the level of a single "unit". A unit can be:
- one order — an online store, a restaurant, a flower shop;
- one customer — an education centre, a clinic, a service business;
- one deal — real estate, B2B.
If one unit makes a profit, the business can scale. If it makes a loss, more advertising only grows the loss.
5 key metrics
| Metric | Meaning |
|---|---|
| Average order value | The average amount of one order |
| Variable costs | Costs per order: cost of goods, delivery, packaging, fees |
| Profit per order (margin) | Average order − variable costs |
| Lead-to-sale conversion | The percentage of leads that become sales |
| CAC | The cost of acquiring one new customer — CAC |
Illustrative example: an online store
| Item | Amount |
|---|---|
| Average order | 300,000 so‘m |
| Cost of goods | 165,000 so‘m |
| Delivery and packaging | 25,000 so‘m |
| Payment fees and other | 10,000 so‘m |
| Profit per order | 100,000 so‘m |
| Lead to sale | 20% |
Maximum cost per lead
Break-even cost per lead = profit per order × conversion
100,000 × 20% = 20,000 so‘m. That's the highest cost per lead you can pay without losing money on the first purchase.
- If a lead costs 15,000 so‘m → a customer costs 75,000 so‘m → each order leaves 25,000 so‘m profit.
- If a lead costs 25,000 so‘m → a customer costs 125,000 so‘m → a 25,000 so‘m loss on the first purchase.
Now "is 25,000 so‘m expensive?" has a precise answer: for this business, on the first purchase — yes. But factoring in repeat purchases can change the picture.
Repeat purchases: factoring in LTV
If a customer buys an average of 3 times a year:
- LTV (on profit) = 100,000 × 3 = 300,000 so‘m;
- paying 125,000 so‘m per customer becomes profitable.
But this works only if repeat purchases really happen: a customer base, Telegram, reminders, a loyalty programme — repeat sales and LTV.
4 levers to improve unit economics
| Lever | What to do | Effect |
|---|---|---|
| Average order | Bundles, add-ons, "one more" offers | Higher profit per order |
| Margin | Negotiate with suppliers, optimise packaging | More left from every sale |
| Conversion | Fast replies, a script, a strong profile | More sales from the same leads |
| Repeat purchase | Work the customer base, reminders | Higher LTV |
Conversion is often the fastest and cheapest lever: replying to leads quickly — lead response time.
Fixed costs and break-even
Unit economics shows one order, but a business also has fixed costs: rent, salaries, utilities. The break-even point:
Orders needed per month = fixed costs ÷ (profit per order − marketing cost per order)
Illustrative example: fixed costs of 30,000,000 so‘m, profit per order of 100,000 so‘m, marketing cost per order of 75,000 so‘m. 30,000,000 ÷ 25,000 = 1,200 orders a month. If that number isn't realistic, you need to change the price, the margin or marketing efficiency.
Making ad budget decisions
- Calculate profit per order.
- Take conversion from the CRM — a real figure, not a guess — CRM for small business.
- Work out the maximum cost per lead.
- Compare it with your actual cost per lead.
- Decide: if it's lower, raise the budget gradually; if higher, fix conversion, the creative or the offer first.
Budget structure — planning a marketing budget.
Common mistakes
- Calculating from revenue instead of profit.
- Forgetting delivery, fees and returns.
- Guessing conversion instead of taking it from the CRM.
- Counting repeat purchases that don't actually happen.
- Raising the ad budget when unit economics shows a loss.
Questions and answers
Is unit economics only for online stores?
No. It works for any business: in an education centre the unit is one student, in a clinic one patient, in real estate one deal.
What if I have no data?
Start with rough numbers and spend 1–2 months collecting real conversion and average order in the CRM. Then update the calculation.
How often should I recalculate?
Monthly for advertising and conversion; quarterly for price, cost of goods and fixed costs.
If unit economics shows a loss, should I stop the ads?
Not necessarily. First see which lever can be improved: conversion, average order, repeat purchases. A loss on the first purchase is sometimes fine if LTV covers it.
Conclusion
Unit economics gives a precise answer to "is this lead expensive?": profit per order × conversion = maximum cost per lead. Repeat purchases, average order value and conversion push that limit higher. Level Marketing starts from point A: we record your average order, conversion and cost per lead, and plan the ad budget around your business's numbers.
