Contribution margin calculator
What each order really leaves you, and how much of that you can spend winning the customer.
≈ 3 minutes
Work out my contribution margin
The maximum CAC you can pay for a customer
The ceiling on what you can pay for a customer is not the margin on their first order. A customer who returns contributes several times over, and that sum is what funds acquisition. This calculator starts from accumulated contribution, subtracts the profit you want to keep, and gives you the maximum CAC your business can carry.
Every calculation runs in your browser. The figures you type are never sent to a server and are never stored.
Your results will appear here
Enter the first order contribution and the repeat purchases you expect.
- Contribution on the first order
- Expected repeat orders and their contribution
- Profit you want to keep per customer
Calculation results
Maximum CAC with target
—
The most you can pay per customer and still earn what you want.
Break-even CAC—Without a profit target
Cumulative contribution—First order plus repeats
Safety margin—Against your current CAC
Current CAC—
Declared horizon—Months
See the breakdown
| First order contribution | — |
| Repeat orders | — |
| Contribution per repeat | — |
| Cumulative contribution | — |
| Target profit | — |
| Maximum CAC with target | — |
Recommended next step
You know how much you can pay. What is missing is when you get it back: a CAC that works over twelve months can drain your cash if it takes eight to return.
Work out my payback periodResults are estimates based on the information you enter. Fees, taxes and platform terms can change: always check the figure that matters to you against your invoice or the official platform. They do not replace your real invoices, your official accounts or professional tax, financial or legal advice.
What this tool works out
This maximum profitable CAC calculator sets the ceiling on what you can pay to acquire a customer, counting what that customer contributes across their whole relationship with you rather than on their first purchase alone.
Acquisition cost is worked out by dividing total sales and marketing spend by the new customers won. What decides whether that figure is sustainable is not the revenue the customer generates but their contribution: what survives their orders after variable costs.
Accumulated contribution, not revenue or gross LTV
This does not use customer lifetime value measured in revenue. A customer who spends $500 does not hand you $500 to spend acquiring them: they hand you what survives that $500 after product, shipping, packaging, fees and returns.
That is why the calculation asks for two different contributions. The first order is usually smaller, because it often carries a welcome discount or free shipping. Repeat orders are usually larger, because the customer already knows you and buys without an incentive.
The sum is accumulated contribution, and it is the only real money available to pay for acquisition and still leave profit.
How the formula works
Expected contribution is accumulated, then the profit you want to keep is taken out.
accumulated contribution = first order contribution
+ repeat orders x contribution per repeat
break-even maximum CAC = accumulated contribution
maximum CAC with target = accumulated contribution - target profit
safety margin = maximum CAC with target - current CAC
Break-even maximum CAC is the point where the customer leaves nothing behind. Maximum CAC with target is the one to use in practice, because it sets aside the profit you want up front.
A worked example
A customer leaves $18 of contribution on their first order. Historically they return 2.5 more times within twelve months, contributing $14 each time. The store wants to keep $10 of profit per acquired customer and currently pays $25 per new customer.
| Item | Value |
|---|---|
| First order contribution | $18.00 |
| Expected repeat orders | 2.50 |
| Contribution per repeat order | $14.00 |
| Accumulated contribution | $53.00 |
| Break-even maximum CAC | $53.00 |
| Maximum CAC with target profit | $43.00 USD |
| Safety margin over your current CAC | $18.00 |
The customer contributes $53 in total. That is the absolute ceiling; with $10 of profit set aside, the working maximum drops to $43. Since $25 is paid today, there is $18 of safety margin to bid higher or absorb a bad month.
How to read the result
The safety margin is the operational figure. Positive means you have room: you can bid higher, open more expensive channels, or absorb a CAC that climbs in peak season. Negative means you are paying more per customer than that customer will leave you once your profit is set aside.
A thin safety margin is not necessarily a problem, but it is a warning: any deterioration in conversion, ad costs or repeat rate pushes you into negative territory before you have time to react.
It is worth revisiting the number whenever your channel mix changes. A healthy average CAC can hide one excellent channel and another that loses money on every customer.
Repeat rate is a forecast, not a fact
The most fragile input in the whole calculation is how many times the customer will come back. That number is a forecast about the future, and the longer the horizon you use, the more uncertain it becomes.
A horizon backed by your own history is defensible. A long one with a repeat rate estimated by feel produces a generous maximum CAC that may take years to be proved wrong, and by then the money is spent.
The sensible caution: use the repeat rate you can demonstrate from your own data, not the one you would like to have.
What to decide next
Knowing how much you can pay says nothing about when you get it back. A $40 CAC that is sustainable over twelve months can still choke you if it takes eight months to recover and the business has no cash to bridge the gap.
What this assumes
- The repeat rate holds within the horizon you set
- The contributions you enter already deduct every variable cost
- The average customer is representative of the whole
- The time value of money is not discounted within the horizon
- Target profit is set aside per acquired customer, not per order
What it does not cover
- How fast the investment comes back, which is a different question
- Splitting CAC across acquisition channels
- Customers who arrive at no cost through referral or brand
- The natural decay of repeat rate over time
- Fixed marketing costs that would exist anyway
Frequently asked questions
Which contribution do I enter, the first order or the average?
Both, separately. The first order usually leaves less because it carries a welcome discount or free shipping, and repeats usually leave more. A single blended average hides exactly the difference that makes acquisition sustainable.
Can I use customer lifetime value measured in revenue?
No. A customer who generates $500 in revenue does not give you $500 to spend on acquisition: they give you what remains after product, shipping, fees and returns. Using revenue instead of contribution overstates maximum CAC when variable costs exist; the size of the overstatement depends on your cost structure.
What horizon should I use?
The shortest one your own data supports: one where you already have closed cohorts and can check how much they actually repeated. Longer horizons produce generous figures resting on repeat purchases that have not happened yet, while the money is spent today.
What if my current CAC exceeds the maximum?
You are buying customers who do not pay for themselves once your profit is set aside. The ways out are lowering acquisition cost, raising contribution per order, getting customers to repeat more often, or deliberately accepting less profit per customer.
What does an impossible profit target mean?
That the profit you want to keep is larger than everything the customer contributes. No CAC satisfies the target, not even zero: the problem is not acquisition, it is margin or repeat rate.
Does this maximum CAC apply to all my channels?
It works as a global ceiling, not as a per-channel target. Each channel brings customers with different contributions and repeat rates, so a healthy average CAC can hide one profitable channel and another losing money on every customer.
Do I include marketing salaries in CAC?
In the CAC you compare here, include what varies with acquisition: ad spend, affiliate commissions, performance agencies. A fixed salary is paid whether you win a hundred customers or a thousand, and including it distorts comparisons between channels.
What should I work out after this?
How long it takes to get the money back. A CAC that is sustainable over twelve months can still strangle you if recovery takes eight: profitability and liquidity are two different questions.
Official sources
Shopify — ecommerce customer acquisition and cost per customerhttps://www.shopify.com/blog/ecommerce-customer-acquisition
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