One concept that’s helped me most in my startup journey

As part of my quest for lifelong learning, I’ve been supplementing my real-life startup journey with online business education. 

A quick recap: A few months ago I took a leap of faith and enrolled in a 9-month alternative MBA program called ThePowerMBA. When I first wrote about taking this business education journey a few months back, I contemplated three inquiry questions that would guide my learning:

  1. What would it look like to learn the exact skills I needed;
  2. to find the educational experience engaging;
  3. and to have it be conducive to my lifestyle and learning style?

So far I’ve been able to learn specific and relevant skills, and in an engaging format with real-life case studies. As long as I make time for it, I’m learning. 

So, back to the prompt in the title. What has been the one concept that’s helped me the most in my startup journey so far?

It’s the concept of unit economics.

ThePowerMBA instructor Borja Adanero Guinea describes key unit economics.

First of all, because every startup employee — including my own colleagues — talk about it endlessly. 

Developing a viable business — especially if you’re an early-stage startup — can get seriously complicated. Unit economics simplifies all of this by measuring profitability on a “per unit” basis.

Simply put: unit economics is the revenue per unit minus cost per unit.

And if customer lifetime value is greater than customer acquisition cost, you’ve got yourself a sustainable business model. 

ThePowerMBA instructor Allie Whitefleet shows different ways to calculate Basic CLTV (lifetime revenues) with Gross Margin.

Of course, there are many data points that feed into each of these elements. The framework helps you think about what kinds of operations, marketing, pricing models, and more that you might proportionally need to make your business work. 

The simplicity makes me reflect what it would look like if more folks in the social impact world adopted unit economics into their work. And could this concept transcend the currency of money, and perhaps use the real most valuable currency: time (i.e. hours)? This could then apply to social change and people-powered movements, including advocacy and political campaigns, where success cannot necessarily be measured by financial cost. Just some of my year-end musings.

Until next time,
Leah

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