Three numbers that decide if you scale
Revenue can grow while you lose money on every new buyer. Three numbers show whether growth pays. Customer acquisition cost (CAC) is what you spend to win a buyer. Contribution margin is what one order leaves after its own costs. Lifetime value (LTV) is what a buyer is worth across all their orders. Put them side by side and the answer is plain.
The three metrics at a glance
| Metric | Formula | What it tells you |
|---|---|---|
| CAC | Marketing spend / new customers won | What one new buyer costs you |
| Contribution margin per order | Order value - product, shipping, packaging, payment and returns costs | What each order leaves to pay back ads and overheads |
| LTV | Contribution margin per order x orders per customer | What a buyer is worth over time |
| LTV to CAC | LTV / CAC | Whether a buyer pays back what it cost to win them |
Customer acquisition cost
CAC is your marketing spend divided by the new customers it brought. As a worked example, spend ₹50,000 on ads and creator posts in a month, win 100 new buyers, and your CAC is ₹500. Count only new customers, not repeat orders. Include everything you paid to get them, such as ads, free samples for creators and first-order coupons. Work it out per channel too. Meta, Google and creators rarely cost the same per buyer, and a blended CAC hides the channel that is losing money.
Contribution margin per order
Contribution margin is the order value minus the costs that come with that order. That means product cost, shipping, packaging, payment charges and returns. Leave ads out, because CAC already counts them. In our example, a ₹1,000 order with ₹600 of those costs leaves ₹400. That ₹400 pays back your CAC first, then rent and salaries. On COD, count the shipping you lose on parcels that come back. It is easy to miss, and it can turn a healthy margin thin.
Lifetime value
LTV is what a buyer is worth over every order they place. Use contribution margin, not revenue, so costs are already taken out. If a typical buyer orders three times, their LTV is ₹400 times 3, or ₹1,200. Base the order count on your real repeat data, not hope. A new store can use a short window, such as orders in the first year.
The LTV to CAC check
Divide LTV by CAC. In our example, ₹1,200 divided by ₹500 is 2.4. A common benchmark is about 3 to 1. Below that, each buyer barely repays the cost of winning them. Look at the first order too. It leaves ₹400, but the buyer cost ₹500, so you are ₹100 down until they order again. That is fine only if they really come back. The other end matters too. Shopify notes that a ratio above 5 to 1 can mean you are not investing enough in growth.
Improving each number
Each number has its own levers. Lower CAC with better creatives, tighter audiences and a product page that converts. Raise contribution margin with bundles, fewer COD returns and cheaper shipping rates. Raise LTV with a product worth buying again, email follow-ups and a loyalty reward. The Storemate's built-in analytics show sales, orders, average order value and customers in one place, which gives you the inputs for all three.