Sweating the details on profitability

Unit economics is a basic concept for understanding whether a business is on the path to profitable growth. Yet companies often fail to apply it when analyzing their financial statements and assessing where profits come from, Albert Ramos, founder of fractional CFO firm Stratego, told CFO Brew.

Per-unit measures of revenue and profitability “should dictate the amount of resources and marketing that you should be pumping” into specific products or business lines, he said.

Ramos, who caters to fitness and wellness companies, said that overlooking per-unit economics is not uncommon. Many operators are guilty of not going through their finances “with a fine-toothed comb,” he said. They will look at top-line revenue, “then different service lines up there, and then they quickly go down to the bottom” of financial statements ‘to see, what does that look like?”

They may also assume a product or service is performing well because it seems to be broadly liked by customers. “I see this time and time again, because it’s like the sexy line item…everyone loves,” Ramos said. But when Ramos shows his clients all the expenses going into that item, “you might as well just light your cash on fire.”

Case studies. Large, publicly held companies also use unit economics for measuring financial performance.

In DoorDash’s Q4 and full-year 2025 earnings report, released in February, the company laid out per-unit performance expectations for 2026. It expected “unit economics in the US restaurant category to increase from 2025,” but at a slower rate than in recent years. It also said it expects “unit economics in our grocery and retail categories to turn positive” in the second half of this year.

When DoorDash was cash-strapped in 2018, it shifted to a “maniacal focus on the unit economics of the business,” Keith Yandell, the company’s chief business officer, said in a 2024 episode of Sequoia Capital’s podcast Crucible Moments. DoorDash no longer could choose between growth or profitability; it had to focus on both to survive, Yandell explained. The company became “hyperfocused” on shortening delivery times.

Variables all the way down. Per-unit costs depend on a company’s operating model—a Pilates studio looks different than a med spa or a supplements company, Ramos noted. As their fractional CFO, Ramos digs deep into metrics like per-unit contribution margin, EBITDA, payroll margin, operational expenses, and marketing spend per unit, and fixed costs like rent and utilities, “all as a percentage of revenue.” And that’s just a small sampling.

“When you talk about unit by unit and the economics per unit…you’re looking down to the granular all leading up into your P&L,” he said. “It’s not just a revenue block item; you have to ask far more questions.”

A common problem Ramos encounters is that businesses “want to offer the world,” but end up selling products or services that actually aren’t making money. He asks clients if they know their profit margin for each vertical. They may know the consolidated number, but the vast majority don’t break it down from there, Ramos said.

So how are they making their business decisions?

“They see people buying,” therefore “it must be a great product or great service,” Ramos said. “But they don’t realize the amount of resources [they] put in that, and [they’re] only making six cents, or maybe sometimes they’re underwater and they don’t even know it. You’re actually losing money on that vertical; why would you continue that?”

What’s missing? Finance teams cognizant of unit economics have to be careful not to miss less common, but still important, inputs that are an important part of calculating unit economics.

Ramos noted that companies regularly overlook leakage in line items “that are leading to a lower net revenue.” This includes merchant fees, refunds, and delinquencies.

“The thing I see that a lot of finance teams miss most often is that two customers can post the same revenue and the same gross margin, and still not be worth the same value to the business,” David Zwick, CFO of accounts receivable automation provider Billtrust, told CFO Brew. “The reason is that most teams stop their unit economics at gross margin, and that’s not the correct way of doing it.”

By stopping there, he continued, finance teams miss “what it actually costs to turn that revenue into cash.” Some customers, he explained, may pay their bills in a timely manner. Others may take up to 90 days.

Businesses with slow-to-pay customers need to “load in the cost of financing customers’ receivables and the collections effort it takes to get paid,” Zwick said. Both prompt payers and those that drag things out “can look identical on the line everyone watches in the financial statement, yet they can have very different contribution margins by the time the cash is actually collected and in the door.”