Show me the money: How unit economics works and why you should know that

Picture this: It’s 2012, and I’m in my media business management class in polytechnic. It’s the end of the semester, so exams are over, final presentations are done, and the holiday season is approaching. All is well.

Or not.

“Nat, come see me for a bit,” my lecturer says after the class.

When I walked up to his desk, Mr. [Redacted] showed me the scores of the entire cohort. My name was all the way at the bottom of the last page, with the number 50 beside it.

“I want you to know that I only passed you because I don’t want to see you again next semester,” he says, looking me dead in the eye.

Ouch. He was probably joking (or at least I hoped he was), but I totally deserved it. I’d coasted through that entire module, leeching off of my classmates during group projects and barely paying any attention during lectures. I wasn’t surprised that I’d almost failed, but I was also pretty elated that I didn’t have to sit through Mr. [Redacted]’s classes the next semester.

Almost a decade after that incident, I was tasked to write the script for the second episode of our new Tech in Asia Originals series, “Tech in Asia Explains: Unit Economics.” And I’ve got to admit, I really regretted not taking his class seriously.

As I embarked on the project, I lost track of how many permutations of the search term “how calculate unit economics startup” I’d typed into Google and how often I started interviews with, “Let’s pretend I don’t know anything about unit economics.”

Industry leaders explaining the concept of unit economics to the author for the fifth time while he pretends to understand everything.

Eventually, thanks to the patience, knowledge, and expertise of Sequoia Capital’s Pieter Kemps and Fave CEO Joel Neoh, we put together a fine video explaining the ins and outs of unit economics, which even a schmuck like the 2012 version of me would understand.

In Tech in Asia Explains: Unit Economics, Kemps and Neoh break down one of the most important aspects of running a business – how to tell whether it’s making any money off of its core product. We also added a voiceover narration from yours truly and some fun graphics that help illustrate the concept in an entertaining fashion.

Aside from explaining the math behind running a profitable business, the video discusses why it’s important to keep tabs on a business’ unit economics, what might go wrong if founders don’t pay attention to it, and what can be done to save a business if its unit economics are negative.

Some might think that unit economics is a basic concept, but we’ve seen what happens when businesses lose sight of sustainability in their pursuit of rapid growth. Our hope is that this video – as well as others that we have lined up – will educate and inspire the next generation of innovators to build businesses with the right mindset so as to avoid repeating history.

So if you’re a budding entrepreneur or first-time founder, you definitely wouldn’t want to miss out on this episode. Check it out here.