Contribution LTV vs Revenue LTV

Revenue LTV is cumulative net revenue per original acquired customer. It still contains money needed for products, fulfillment, payment and platform fees, refunds, returns, and other variable order costs. Using the whole amount as allowable CAC spends the same dollars twice.

For this guide, contribution LTV means cumulative contribution before acquisition cost per original acquired customer through an exact checkpoint. CAC is compared afterward, so it is not buried inside the contribution numerator or subtracted twice.

Revenue LTV by day N = cumulative cohort net revenue through day N / original acquired customers

Contribution LTV by day N = (cumulative net revenue - cumulative variable order costs) / original acquired customers

Allowable CAC by day N = contribution LTV by day N - retained contribution target

Always name the window: day 30, 60, 90, 180, or 365. A 365-day observation is not lifetime value, and an immature cohort cannot prove a future checkpoint.

Open the day-180 contribution payback scenario

Do not apply a first-order margin to all repeat revenue without checking the repeat basket. For each observed order, start with net revenue after discounts and mature refunds, then deduct the variable costs caused by that order.

Order line	Include	Common boundary error
Net revenue	Product revenue after discounts and mature refunds; tax excluded	Using gross sales or refunded revenue
Product cost	COGS for the exact items and quantities	Applying a blended margin to a changed mix
Fulfillment	Pick, pack, packaging, outbound shipping, and variable service	Counting only carrier cost or only the first order
Payment and platform	Transaction, marketplace, and other variable order fees	Treating all fees as fixed overhead
Refunds and returns	Refunded margin, retained fees, reverse logistics, and inventory recovery	Using return rate as the loss percentage
Other variable costs	Per-order support, duties, consumables, or incentives in scope	Omitting costs that grow with repeat orders

Fixed payroll, rent, and software are outside this example unless deliberately allocated. That boundary makes contribution useful for a CAC ceiling, but positive contribution after CAC is not automatically net income.

This transparent example is fictional and uses 100 customers acquired in one cohort. Every observed order has $100 net revenue, $40 product cost, $8 fulfillment, $3 payment and platform fees, $5 mature refund and return loss, and $4 other variable cost.

Per observed order	Calculation	Amount
Net revenue	After discount and mature refund adjustments	$100
Variable costs	$40 + $8 + $3 + $5 + $4	-$60
Contribution before acquisition	$100 - $60	$40

All 100 customers place the first order by day 30. The cohort then records 30 repeat orders during days 31-60, 20 during days 61-90, 35 during days 91-180, and 45 during days 181-365. These counts are illustrative observations, not an industry repeat rate or a forecast.

Observed interval	Orders	Net revenue	Variable costs	Contribution
Acquisition through day 30	100 first orders	$10,000	-$6,000	$4,000
Days 31-60	30 repeat orders	$3,000	-$1,800	$1,200
Days 61-90	20 repeat orders	$2,000	-$1,200	$800
Days 91-180	35 repeat orders	$3,500	-$2,100	$1,400
Days 181-365	45 repeat orders	$4,500	-$2,700	$1,800

The denominator remains the original 100 acquired customers at every checkpoint. Do not divide later value only by customers who repeated; that would condition on survival and overstate the acquired cohort's value.

Checkpoint	Cumulative orders	Revenue LTV	First-order contribution	Repeat contribution	Contribution LTV
Day 30	100	$100	$40	$0	$40
Day 60	130	$130	$40	$12	$52
Day 90	150	$150	$40	$20	$60
Day 180	185	$185	$40	$34	$74
Day 365	230	$230	$40	$52	$92

A revenue-only comparison says $100 day-30 Revenue LTV exceeds $70 CAC. That ignores $60 of variable cost per first order. Contribution LTV is only $40 at day 30, $52 at day 60, and $60 at day 90. It first exceeds CAC at the observed day-180 checkpoint, where $74 leaves $4 after acquisition.

By day 365, contribution LTV is $92. If the business requires $15 retained contribution, allowable 365-day CAC is $92 - $15 = $77. Actual $70 CAC leaves $22 after acquisition and $7 beyond the retained-contribution requirement.

1. Fix acquisition membership: Define the cohort from verified first-order date and keep the original customer count as denominator.
2. Use exact windows: Include orders and adjustments occurring within 30, 60, 90, 180, or 365 days of each customer's acquisition.
3. Wait for maturity: Do not publish day-180 value for customers observed only 90 days.
4. Backfill late losses: Recalculate checkpoints when refunds, chargebacks, returns, or cost corrections arrive.
5. Keep values cumulative: Day 180 includes all contribution from acquisition through day 180, not just days 91-180.
6. Label the observation: Say “365-day contribution per acquired customer,” not “lifetime value.”

Do not extend the curve with a generic repeat-purchase rate, terminal value, or industry multiple. A forecast can be shown separately, with assumptions and uncertainty, but it is not observed contribution and should not silently raise allowable CAC.

Cash boundary: Contribution payback is not cash payback when inventory is purchased early, processors delay settlement, or suppliers offer terms. Add a separate cash-timing model when liquidity sets the acquisition ceiling.

Shopify documents customer, sales, and profit reports used to identify cohorts, net sales, product cost, and margin context. Google Analytics documents ecommerce purchase and refund fields. The fixed checkpoints, contribution boundary, fictional order history, retained-profit rule, and allowable-CAC calculation are ROAS Break modeling judgments, not platform forecasts.

• Shopify customer reportsCustomer and cohort reporting context. Checked August 20, 2026.
• Shopify sales reportsNet sales, discounts, returns, and sales adjustments. Checked August 20, 2026.
• Shopify profit reportsProduct cost, gross margin, and profit reporting context. Checked August 20, 2026.
• Google Analytics ecommercePurchase, item, and refund event fields. Checked August 20, 2026.