Finance and Unit Economics glossary

The same idea, shortened.

The inverse of ROAS. Easier to reason about when the ratio is small.

Media spend as a share of revenue.

Advertising specifically, over revenue.

Average order value across all channels.

Conversion rate across all traffic. Useful as a trend, useless for decisions.

Total spend divided by total conversions across all channels.

Average cost per click across everything.

Average cost per lead across all sources.

Average cost per thousand across all placements.

Average lifetime value across the whole base.

Average margin across everything sold. Hides the products losing money.

Revenue divided by all users, paying or not.

The level of sales at which total revenue exactly covers total cost, so profit is zero. Expressed either in units or in revenue, depending on which you can act on faster.

The number of units you must sell to cover fixed costs, found by dividing fixed costs by contribution margin per unit. It turns a vague target into a countable one.

The same at customer level, after everything variable.

The most you can pay per conversion and still not lose money.

Customers needed to break even.

Orders needed to cover fixed costs.

Revenue needed before profit begins.

How much revenue or contribution each unit of acquisition spend produced.

New recurring revenue divided by acquisition cost.

The same at campaign level.

Whether one campaign made money after margin.

Recovering the money invested in growth.

How quickly cash spent comes back, regardless of accounting profit.

Contribution by acquisition channel. Reveals which channel buys revenue that does not pay.

Profit by route to market.

Return by acquisition channel.

Whether a joining group has paid back what it cost.

The volume at which contribution covers fixed cost.

Contribution divided by clicks. Your true maximum bid.

What one customer contributes after all variable cost.

The same per order.

Contribution divided by sessions.

Contribution divided by distinct users.

Contribution divided by visits.

What each unit contributes after variable costs, as a percentage.

The same measure under another name.

Money put into winning customers, framed as investment rather than expense.

The absolute money one customer contributes toward fixed costs.

That contribution as a share of what they spent.

Total cost to serve a customer against what they pay.

What is left from one customer after serving them.

The accounting name for days of inventory on hand. It appears in the cash conversion cycle alongside receivable and payable days.

Earnings before interest and tax, as a share of revenue.

The same excluding depreciation and amortisation. Popular because it flatters capital-heavy businesses.

Return on money spent growing existing accounts.

How much of the fixed base current contribution covers.

Profit by market. Shipping and returns can turn a good country bad.

Gross margin expressed as a percentage.

Revenue minus cost of goods, per customer.

Gross profit as a share of revenue.

Margin on the additional revenue rather than on the average.

Profit on the next unit of activity, which is rarely the average profit.

How many times acquisition cost the lifetime value covers.

How much of the acquisition cost has been earned back so far.

The same relationship written as a ratio. Three to one is the common target, and it means nothing without payback period.

What the next customer costs, not what the average one cost. Always higher.

What the next unit adds after variable cost.

The conversion rate of additional traffic, which is worse than the traffic you already had.

Cost of the next conversion at current spend levels.

What one more customer is worth at the margin.

Lifetime value of the next customer acquired, usually lower than the base average.

Marketing cost as a share of revenue.

Marketing expense over revenue. The number CFOs watch during a squeeze.

Total marketing cost over revenue produced.

How long before the whole operation covers its costs.

How many months of gross profit it takes to recover acquisition cost.

Net margin as a percentage, after everything.

The point where operating profit reaches zero.

Operating expenses over revenue.

The costs of being open rather than the costs of selling one more unit. Rent, salaries, software and in almost every case the entire advertising budget.

How much a product or channel adds to operating margin overall.

Operating profit as a share of revenue, after overhead.

What one order contributes after goods, shipping and processing.

How many times over the customer repaid their acquisition cost.

Profit by product after all variable cost.

Growth in what is left after costs. Frequently negative while revenue growth looks fine.

Profit per account, where one account holds many users.

Gross profit divided by customers.

Gross profit divided by orders. The ceiling on what an order may cost to win.

Profit per active subscription per period.

Return on winning back lapsed customers.

Return on referral programmes. Often the highest, and hardest to scale.

What retention activity costs per customer kept.

Money spent keeping customers rather than finding new ones.

Return on retention spend. Usually higher than acquisition ROI and usually underfunded.

Total budget aimed at retention.

The increase in revenue over a period, in currency.

The same as a percentage. Compare it against the cost of buying that growth.

Combined go-to-market cost against revenue.

Sales cost as a share of revenue.

Sales expense over revenue.

The same at variant level. Where unprofitable sizes and colours get found.

The point where one unit stops losing money.

Whether the price covers the costs that move with volume. If not, growth makes things worse.

A cost average that accounts for volume differences.

Average selling price weighted by units sold.

Revenue averaged with volume taken into account.

Acquisition cost weighted by channel volume.

Return weighted by spend rather than a simple average of campaign ratios.