Start with the decision, not the denominator
| Object or view | Use it when | Boundary to declare |
|---|---|---|
| Order or job | Revenue and delivery costs repeat around one sale or project | Included delivery costs, relevant range and completed-unit definition |
| Customer or cohort | Acquisition and service economics unfold over time | Customer state, contribution boundary and finite horizon |
| Productive hour, shift or FTE | A constrained resource limits output | Paid versus productive capacity and stepped costs |
| Whole-period business view | The decision concerns operating profit or dated cash | Profit layer, period and cash dates |
Choose one of four economic views
| Reader question | Economic view | Narrow owner |
|---|---|---|
| What does one sale or delivery contribute? | Order or job contribution on a declared variable-cost boundary | Ecommerce profitability or job costing |
| What cost belongs to one object? | Allocated cost with a named pool, driver, period and reconciliation | Denominator guide |
| Which constrained resource limits output? | Contribution or cost per productive hour, shift or FTE | Labour-budget guide |
| Does acquiring and serving a customer recover over time? | Finite cohort and payback view | SaaS unit-economics pillar |
Keep object, numerator and horizon aligned
- Name the decision and the repeatable object or constrained resource.
- Set one period or finite horizon and one neutral currency and indirect-tax basis.
- Declare which costs are allocated, incremental or variable for this decision.
- Keep the numerator attached to the denominator that generated it.
- Fail closed when the denominator is zero or too incomplete to interpret.
- Reconcile unit totals to whole-period profit, then run dated cash separately.
Worked scenario: one service business, three valid views
Reconcile job, productive-hour and whole-period views
This invented monthly scenario uses neutral currency units (CU), excludes indirect tax and omits cash dates. It demonstrates arithmetic, not a benchmark.
| View | Arithmetic | Result |
|---|---|---|
| Monthly contribution | 12,000 − 6,600 | 5,400 CU/month |
| Contribution per completed job | 5,400 ÷ 12 | 450 CU/job |
| Contribution per productive hour | 5,400 ÷ 180 | 30 CU/hour |
| Simplified operating result | 5,400 − 3,000 fixed operating cost | 2,400 CU/month |
When capacity changes the result
A unit result assumes a relevant operating range. Required coverage hours, paid hours, uncovered or excess hours and stepped capacity costs can change when the business adds a shift, role or facility. Test the new capacity scenario rather than extrapolating the old ratio.
| Decision branch | Exact tool owners | Boundary retained by the tool |
|---|---|---|
| Revenue and staffing share | revenue-per-employee; staffing-cost-percentage | Scoped period totals, not productivity verdicts |
| Coverage and labour budget | shift-coverage-cost; labour-budget-scenario | Coverage hours and user-entered labour assumptions |
| Team mix and unused capacity | headcount-mix; bench-cost | Role mix and paid-capacity boundaries |
| Overtime versus additional capacity | overtime-vs-hire | Scenario comparison, not employment advice |
Nine local workforce workflows remain market-scoped: AU total employee cost and employee-versus-contractor; US total employee cost and contractor-versus-employee cost; and CA, GB, IE, NZ and SG total employee cost. This Global guide neither imports their statutory inputs nor treats them as hreflang equivalents.
Follow the narrowest next decision
Run the matching Global capacity workflow
- Revenue per Employee Scenario Planner
Compare revenue and contribution per FTE across staffing scenarios
- Staffing Cost Percentage Planner
Compare staffing cost with a user-entered share-of-revenue target
- Shift Coverage Cost Planner
Choose a shift pattern that covers required hours with explicit entered loadings
- Labour Budget Scenario Planner
Translate role headcount, active months, compensation, contractor and overtime assumptions into a period labour budget
- Employee and Contractor Mix Planner
Compare cost and productive capacity across a user-defined workforce mix without classifying workers
- Unassigned Capacity Cost Planner
Measure the cost and user-entered revenue-capacity effect of paid but unassigned hours
- Overtime vs Hire Comparison
Compare overtime and hire cost at an entered demand level, including capacity and exact overtime-cost contribution
Mistakes and stop conditions
- Changing a denominator without restating the numerator.
- Comparing CU/job directly with CU/customer or CU/hour.
- Treating allocated cost as incremental cash cost or omitting cost-to-serve.
- Extrapolating beyond the relevant range or assuming capacity expands without a step cost.
- Using revenue per employee as a productivity verdict.
- Treating positive unit contribution as whole-business profit or dated cash.
- Importing CAC or LTV where no repeat-customer decision exists.
Unit-economics questions
- What is a unit for a service business?
- Use the repeatable delivery object or constrained resource that matches the decision: often a job, customer, productive hour or shift. State its completion and cost boundary.
- Is a customer always the right unit?
- No. A customer or cohort fits acquisition and service economics, while a job, order, hour or shift may better match delivery or capacity.
- Is contribution per unit the same as gross margin?
- Not necessarily. Contribution follows the declared variable-cost boundary; gross margin follows the cost-of-sales classification in the business records.
- When should I use a productive hour or shift?
- Use it when that resource constrains delivery and paid, productive, uncovered and excess capacity are defined.
- Do I need CAC and LTV?
- Only when acquisition and finite-horizon customer economics are the decision. They are not universal unit-economics requirements.
- Can good unit economics still create a cash problem?
- Yes. Timing, working capital, fixed costs and capacity commitments can create a dated shortfall even when a unit contributes positively.
Sources and calculation owners
- OpenStax: Contribution margin and contribution per unit — OpenStax: Durable educational support for contribution boundaries; it does not supply a target or benchmark.
- OpenStax: Cost behaviour and relevant range — OpenStax: Educational support for variable, fixed and stepped-cost boundaries; no market value.
- OpenStax: Decisions under constrained resources — OpenStax: Educational support for constrained-resource views; no claim that one ranking decides strategy.