Basic unit economics of a business

Basic unit economics of a business

Every startup or business ultimately aims to turn a profit by providing a product or service with a higher value than the costs to deliver it. Whether you are planning to start a new venture or currently running one, it's important to understand the unit economics of your business.

Unit economics is defined as the direct revenues and costs associated with a particular business model expressed on a per unit basis. 

Understanding the unit economics of your business provide a way to measure its profitability. So let's start by identify the unit for your business. If you are selling a product like a glass of lemonade 🍋, that would be the unit. For those providing a service, the unit would be the customer or client.

The myth of the average consumer

The myth of the average consumer

Whether you are running a business or a marketing campaign, ideally, you would prefer to target as many people as possible. Since by definition, most people are average (yes you are), the largest target market is the average consumer.

But, who is the average consumer? How do they make decisions and what are their preferences? Let’s take a look from the consumer's perspective.

What's your evil plan?

Finally got to read Hugh Macleod second book, Evil Plans. It is about why you should be doing things that you really love and care about. Hugh's Evil Plan is similar to a Big Hairy Audacious Goal (BHAG). He also shares some interesting marketing strategies he used. Must read for anybody he wants more from their work.

"It has never been easier to make a great living doing what you love. But to make it happen, first you need an EVIL PLAN. Everybody needs to get away from lousy bosses, from boring, dead-end jobs that they hate, and ACTUALLY start doing something they love, something that matters. Life is short." -Hugh MacLeod  

Coming up with an EVIL PLAN is definitely fun and exciting but remember it is still only a plan until you do something about it.

Blogging is marketing

Someone asked if I'm using blogging as some sort of marketing strategy. The simple answer is yes. In fact, if you remember the picture below from REWORK, everything you do is marketing.

You might be blogging to talk about your personal life, to share your passion or to improve your writing skills. Whatever the reason may be, since your blog is public, you are directly or indirectly marketing yourself.

This is true for the other online presence you have like Twitter and Facebook. Marketing isn't just about the product. It's also about who made it, why it was made and how it was made.

I'll encourage everyone to start a blog because it's really free marketing. However, you need to realize that everything you post on it will affect not just your personal life but your professional life too. When it comes to marketing, everything matters.

Get permission first

While I was enjoying one of my favourite food Hokkien Mee, the owner came over and asked for my contact number. She says that they might be moving to another location and would like to keep me informed. I thought that was a brilliant idea and gave her my number. It might sound as if I just allowed someone to spam my phone but that isn't the case. She specifically asked for my permission to keep me informed about something I'm obviously interested in. Assuming she keep her end of the deal by not spamming me with unrelated stuff, this is a win win situation.

Traditional marketing approaches like advertising tries to interrupt as many people as possible. A better approach would be Permission marketing (a term coined by Seth Godin) which focus on building your permission base first before marketing to them.

This approach feels more personal for the customer and also more efficient for the marketer since they are marketing directly to someone who are interested in their product. And once you have a group of people who are willing to listen to you, you will have a better chance to turn them to a regular and loyal customer.

If you are running a business, writing a blog or starting a group, ask your prospective targets for their permission first before spamming them. They'll thank you and might actually listen to what you have to say.