ESYB2 049 - Your Business Unit Economics
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[00:00:00] Now, I want to introduce a new business planning concept, and it's really not just for business planning, but it's for evaluating your business, and it's looking at the economics of a single transaction. For example, what are the marketing costs, cost to produce the product, your take home revenue, your profit, is there some partners you have to pay, do you have to pay for materials?

In different businesses, obviously, this is very different. I mean, we can be talking about restaurants versus digital products versus Moving, but whatever that is for you, you want to look at what are the finances that go into a single transaction and it helps you to see in a detailed way what needs to be fixed.

Maybe some issue is out of whack. Maybe it takes you. too long or it's too expensive to produce the product. Maybe it's too hard to sell it. Maybe you don't take enough of the revenue home. Maybe there's some other issue. And once you identify that, here are [00:01:00] some typical ways to solve that. Not all of these will work for all businesses, but these are common strategies that businesses use to improve how your business runs.

And if your business is running smoothly, then the unit economics will be more Optimized and more profitable. Some things you can do is scale the business. For example, let's say you outsourcing creation, let's say it's maybe fashion and you printing a thousand at a time. Well, it's gonna cost you cheaper to print a thousand at a time than to print 10 at a time, right?

So as long as you. So, if you want to scale the business, some of your vendors might charge you cheaper prices and you'll be able to negotiate per item, lower price. Of course, improving LTV, we already talked about that, lifetime value of a customer. Getting people to spend more over time. Also decreasing cost in some ways.

Maybe doing fewer customizations, which is something that businesses typically run into where customers [00:02:00] ask for specific things for them. But customizations slow you down and are more expensive to produce. And small businesses usually go out of their way to customize solutions for clients. But know that long term as your business grows, you need to do less of that so you can scale production to make things cheaper.

Also, various productivity boosts help improve your unit economics. For example, if you make your team more productive, you'll just spend less time and money creating the products. And, of course, process automation within your business. You always want to look at what kind of processes you can automate so that they Go faster and cheaper and therefore your products will be cheaper to create you'll need less staff and so on and so on.

So these are just some strategies to make your business run smoother, which will translate into healthier unit economics.

