Unit contribution and the cost of getting a customer

To read the pre-tax operating surplus for a period, run this:

Surplus for the period = revenue for the period − variable delivery costs − acquisition spend − other fixed operating costs.

Anything that grows with volume belongs in the variable column: purchases, payment fees, the extra work each order pulls. Rent and shared overhead stay fixed, as long as you're inside current capacity. Labor goes wherever the hours actually went, and one expense gets counted once, no more. One subtle thing: while you as the owner haven't paid yourself, the leftover already includes your own labor. When you're comparing doing it yourself against hiring someone out, list that part separately instead of letting it hide inside the surplus.

Average customer acquisition cost = acquisition spend ÷ new customers that spend produced.

Match the spend to the customers it actually made. If there's a long gap between first contact and first payment, tie the spend to the people who ultimately bought. And if the ad budget already sits inside acquisition spend, don't bury it again under fixed costs.

Keep two more habits. People buy more than once, so track order counts and customer counts as separate numbers. And how CAC flows into your per-order math depends on what you're looking at: first purchases, repeat orders, or renewals.

With price, per-unit variable cost, and fixed costs all stable across the range you're comparing:

Unit contribution = price − variable cost per unit.

Break-even volume = fixed costs ÷ unit contribution.

Volume for a target surplus = (fixed costs + target surplus) ÷ unit contribution.

Round up, because orders arrive in whole numbers. Positive contribution is the whole point: every new transaction peels a little off the fixed costs. At zero contribution, extra transactions add nothing toward fixed costs. Negative contribution makes each additional transaction increase the loss. Review price, delivery costs, or how revenue is earned. Several products? Compute each one separately, then blend the results by the mix you actually expect.

For a hypothetical example in yuan, each order brings in 120, costs 80 to deliver, and represents one new customer costing 20 to acquire. Each order leaves 20. Fixed costs of 1,000 are covered at 50 orders; a target surplus of 2,000 requires 150 orders. Here the acquisition cost rises with each order and is included in its unit cost. For other acquisition arrangements, allocate spending to the relevant period and customer group.

Now change anything structural, hire someone, take a bigger space, buy new systems, and both fixed costs and capacity move. Recompute before trusting the old numbers. Then test the required volume against who you can actually reach, how much you can actually deliver, and whether you can float the cash it takes to get there. See why hiring can make a profitable solo business harder to run.

MoviePass, in 2017, charged $9.95 a month for one movie a day. By its own disclosures, in most cases it paid theaters the full ticket price. The fee was flat per member; the ticket cost climbed with every showing. Which meant viewing frequency decided exactly how much each member left behind.

A business like that has to track paying members and actual usage as two different numbers. The full monthly pass model, including results at different viewing frequencies, is worked through in doing the numbers after a sale.

For repeat purchases, count the original acquisition spend once, then follow that cohort over time: their revenue, your service costs, and any new marketing you spend to keep them coming back. The moment the batch's cumulative contribution covers the original acquisition spend is your CAC payback. Include the customers who stopped buying in that count, otherwise you're measuring only the ones who paid back and missing the ones who didn't.

• To turn quotes into real purchases, test willingness with willingness to pay and demand validation; for who to target first, market segments and entry sequence; for how they find you at all, attention and discovery.
• To amortize the cost of the first copy, look at repeatable products and scalable income; for services, price all your hours through service capacity and effective hourly earnings.
• Once profit is on the page, schedule the cash with cash cycles and funding growth; how operating income becomes personal accumulation lives in money, income, and wealth.

The whole route, from finding customers to earning money, runs through from finding customers to earning money.