DTC unit economics & cohort tracker

LTV means contribution dollars, not revenue

The most consequential mistake in DTC unit economics is calculating lifetime value as revenue. Revenue LTV produces ratios that look fantastic and decisions that lose money, because it ignores the cost of delivering each order.

Contribution-margin LTV — revenue minus COGS, shipping and payment fees for every order in the cohort’s life — is the only version that can be compared against CAC. A customer who spends $400 over three years at a 45% contribution margin is worth $180 to you, not $400. If you paid $120 to acquire them, the ratio is 1.5:1, not 3.3:1.

Orders(t)          = repeat rate in month t
Revenue(t)         = Orders(t) × AOV(t)
Contribution(t)    = Revenue(t) × Contribution margin %
LTV(n)             = Σ Contribution(1…n)
LTV:CAC            = LTV(12) ÷ CAC

Where repeat-rate data comes from, and how to read it

A repeat rate of 8% in month 2 means eight of every 100 customers who bought in the cohort month placed another order two months later. This is a repeat-rate curve, not a retention curve — it counts orders from the same customers, not whether those customers are still "active".

Reading the curve matters more than calculating it. A curve that starts at 10–12% in month 2 and decays slowly is a consumable business. A curve that starts at 4% and stays flat is an accessories business with occasional replacement purchases. A curve that drops to zero by month 4 is a one-off purchase, and no amount of email marketing will change that — the growth strategy has to be acquisition-led with a much higher day-one margin.

• Month 1 is 100% by definition: the cohort just purchased.
• A healthy consumable brand runs 12–18% repeat in month 2 and 5–8% by month 12.
• Subscription businesses replace this curve with an explicit churn rate.
• Gift and seasonal products show a spike in the same month the following year — model that deliberately.

Payback period is a cash constraint, not a vanity metric

The payback period is the month in which cumulative contribution from a cohort equals the CAC you paid to acquire it. A six-month payback means you fund six months of marketing before the cohort repays it — and during that period you must finance both ads and inventory.

This is why payback, not LTV:CAC, is the metric that kills growing brands. A brand with a 4:1 LTV:CAC ratio and a 14-month payback will run out of cash long before it becomes profitable, because it is paying for customers today with money it will not see until next year.

Cash need ≈ New customers per month × CAC × Payback months

Reading cohorts by acquisition month, not in aggregate

Aggregate LTV hides the most useful signal in the data: whether your newer cohorts are performing better or worse than older ones. A brand whose January cohort reaches a 3:1 ratio while its June cohort only reaches 1.8:1 has a deteriorating acquisition problem, even if the blend still looks acceptable.

Three drivers usually explain cohort-over-cohort deterioration: a shift in channel mix towards cheaper, lower-intent traffic; discounting that attracts one-time buyers; and price increases that reduce repeat purchase frequency. Tracking cohorts monthly turns each of those from an argument into a fact.

• Compare LTV(6) across the last six acquisition cohorts — that is the earliest reliable signal.
• Segment cohorts by first-purchase channel to see which traffic converts into repeat customers.
• Segment by first product: attach rate and repeat behaviour vary enormously by entry SKU.
• Watch the month-2 repeat rate most closely — it is the strongest predictor of everything downstream.

From unit economics to a scale P&L

Unit economics becomes a business when you multiply it by volume and subtract fixed costs. The third tab does exactly that: new customers per month, multiplied by year-one contribution, minus CAC, minus fixed monthly costs — the monthly profit the acquisition engine actually produces.

This framing exposes the two failure modes clearly. If year-one contribution per customer is below CAC, growth destroys cash at any volume. If it is above CAC but below CAC plus the fixed-cost burden per customer, the business grows and never turns a profit.