Revenue can grow while the business quietly dies — it happens whenever each customer costs more to acquire than they will ever pay back. Two numbers settle the question: CAC and LTV. Both are computable this afternoon from data you already have.
Strip a store to its skeleton and it is one transaction repeated: buy a customer for CAC, collect LTV over their lifetime. If LTV meaningfully exceeds CAC, you own a machine that converts ad spend into profit. If not, growth just accelerates the losses. Everything else — creative, branding, CRM — is a lever on one of these two numbers.
CAC = total acquisition spend ÷ new customers acquiredSame period for both. Include agency and content costs, not just ad platform spend.
LTV ≈ average order value × gross margin % × purchases per customer over 12-24 months
Use contribution margin, not revenue — a customer who buys ₩100k of product at 40% margin is worth ₩40k of gross profit, not ₩100k. And cap the horizon at 12-24 months: a five-year LTV projection is a story, not a budget input. Pull the purchases-per-customer number from your order history: customers acquired 12+ months ago, average order count since.
| LTV : CAC | Reading |
|---|---|
| Under 1 | Every customer is a loss — stop scaling, fix economics |
| ~1-2 | Alive but fragile; one CPM spike from trouble |
| ~3 | The healthy textbook zone — scale with confidence |
| 5+ | Strong — possibly under-spending on growth |
The forgotten number is payback period: how many months until a customer's cumulative margin covers their CAC. A store can have LTV:CAC of 3 and still die waiting — if payback takes 14 months, every month of growth consumes cash you may not have. Small stores should aim to recover CAC on the first or second order; cash-rich brands can afford patience.
Cutting CAC fights an auction everyone else is bidding in. Raising LTV fights only your own operations:
Use first-order contribution margin as provisional LTV and require near-immediate payback (CAC below first-order margin). As repurchase data accumulates, loosen the constraint honestly rather than borrowing category-average multipliers you cannot verify.
Only with evidence: if your cohorts demonstrably repurchase, acquiring slightly underwater on order one can maximize long-run profit. It is a strategy for proven repeat products, not a hope for new ones — see the break-even ROAS framework for the ad-side version of this discipline.
Monthly is plenty. CAC moves with auction seasons; LTV moves slowly. What matters is watching the trend of both, not re-deriving them daily.
DashBooster tracks revenue, ad spend, repurchase and net profit in one place — the inputs CAC/LTV math needs.
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