10. Unit Economics, Consulting Capacity, and Social Impact Models
After this lesson you can
- Calculate contribution margin, acquisition cost, payback period and lifetime value, and spot the pitfalls in each
- Explain how a healthy-looking ratio can hide a long payback and a cash problem
- Describe the hours cap in expert services and how leverage and productizing address it
- Build a Theory of Change backward and separate outputs from outcomes
- Explain the four SROI adjustments and why critics call its proxies subjective
- Compare integrated and differentiated hybrids, licensing and spinouts, and the choice to stay small
Video coming soon
Videos are planned to publish from December 2026.
A lesson on what one unit of a venture actually contributes. It works through margins, acquisition cost, payback and lifetime value with invented numbers, then covers the hours cap in expert services, impact models and SROI, hybrids, and licensing versus spinouts.
Questions and answers
Questions a learner would ask about this lesson. Think through your own answer before you open each one.
- What is the difference between gross margin and contribution margin?
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Gross margin is what is left from a sale after the direct cost of producing or delivering it. Contribution margin subtracts all variable costs of delivering and serving that customer, such as support time and payment fees. In Founder A's invented case, gross margin is 135 dollars per clinic per month and contribution margin is 120 dollars, and contribution margin is the right base for payback and lifetime value.
- If lifetime value is three times acquisition cost, is the business healthy?
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Not necessarily. The three-to-one figure is a practitioner heuristic, not a research finding. It ignores cash timing and payback length and depends entirely on the retention assumption. Founder A's ratio looks like ten to one, yet each clinic takes 14 months to pay back, and the later cash model shows savings running out.
- Why do expert services hit a ceiling?
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Revenue is tied to the founder's hours. Founder B has about 40 hours a month, loses about 10 to emails, sales and admin, and has about 30 left to deliver work. Leverage, adding junior staff in Maister's sense, and productizing, selling a standard scope at a fixed price with a repeatable process, are two ways to address that cap.
- Does an SROI ratio prove a social venture's impact?
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No. Social return on investment estimates the money value of social outcomes using financial proxies and adjusts for deadweight, displacement, attribution and drop-off. The proxies are chosen, not observed, and in the lesson's invented example one changed proxy moved the ratio from about 1.1 to 1 to about 3.2 to 1. The lesson treats SROI as useful for thinking and weak as proof.
- Is staying small a failure?
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The lesson presents staying small as a legitimate model. Evidence from established small firms in Australia and Sweden found that profitable, low-growth firms more often later reached both growth and profit, though that study is not about startup survival. Serving fewer customers well, a small practice by choice, or supporting a license instead of leading a company are all real options.
Practice quiz
- Question 1Contribution margin differs from gross margin because it subtracts:
- Question 2Founder A's acquisition cost is 1,680 dollars per clinic and contribution margin is 120 dollars per month. What is the payback period?
- Question 3Using the same 120 dollar monthly contribution margin, what is the lifetime value if a clinic stays 36 months?
- Question 4In SROI, deadweight refers to:
- Question 5Founder B converts custom consulting into a fixed-scope package with a fixed price and a repeatable process. This is:
- Question 6Founder B's 600 dollar package has 30 dollars of variable costs. After a repeatable process, delivery takes 8 hours. What is the contribution per delivery hour?
- Question 7Founder C's clinic workshops generate fees and are the same activity that serves families. This is closest to:
- Question 8Davidsson and colleagues' growth and profitability study supports which statement?
- Question 9What is mission drift?
- Question 10On deal terms for licensing or spinouts, what does this course provide?
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