Unit Economics - True CAC, LTGP, and LTV:CAC for Ecommerce

Unit Economics

Unit economics in MerchantFlow gives you the four numbers that determine whether your business can scale profitably: true CAC, time-bounded LTGP, LTV:CAC ratio, and CAC payback period. The page also surfaces the break-even floor that every new-customer order has to clear before paid acquisition stops bleeding cash.

What Are Unit Economics?

Unit economics measure profit at the per-customer level rather than at the company level. Three numbers matter most:

• True CAC - what you actually pay to acquire one new customer, calculated as total ad spend divided by new customers acquired in the same period. This is not platform CPA (which excludes upper-funnel and untracked spend).
• LTGP - lifetime gross profit per customer, measured over a configurable window (90, 180, or 365 days).
• LTV:CAC ratio - LTGP divided by CAC. A ratio above 3:1 is considered healthy; below 1:1 means you are paying more to acquire customers than they generate in margin.

How to Access Unit Economics

Navigate to Customers > Unit Economics (/dashboard/unit-economics) from the main navigation.

The page uses the global timeframe selector to define the acquisition period (when the new customers came in) and a separate LTV window control in the page header (90d / 180d / 365d) to define how long their gross profit is tracked. The default window is 180 days.

Volume & Conversion

The top row of the page shows the operational throughput numbers that frame the rest:

• Total Orders - paid, non-canceled orders in the timeframe. "Paid" is the same recognition set the rest of the P&L uses -- paid, completed, processing, partially_refunded and refunded, with cancelled orders excluded
• Avg Order Value - net revenue divided by orders, counting only orders with a subtotal above zero on both sides of the division, so free, warranty and replacement orders never drag the average down. Refunds on orders placed outside the timeframe are left out of this one figure. Its subtext shows total revenue for the period
• Conversion Rate - sessions converted, when Google Analytics or Shopify Analytics is connected. Its subtext shows the session count behind it
• Revenue / Session - revenue divided by sessions

Without a sessions integration connected, both tiles show a dash. Conversion Rate explains why underneath -- "No session data - connect GA4 or Shopify Analytics" -- while Revenue / Session reads "Needs sessions data".

Acquisition & Profitability

Four tiles carry the headline unit economics: True CAC, LTGP, LTV : CAC, and CAC Payback.

True CAC

True CAC is calculated as:

True CAC = Total Ad Spend / New Customers Acquired

The numerator is every row of synced ad spend in the period with no platform filter applied, so Google Ads, Meta, TikTok, Snapchat and Klaviyo all roll into one number. It is intentionally higher than platform-reported CPA because it includes spend that did not directly attribute to a conversion.

The denominator counts first-time buyers whose earliest qualifying order lands in the timeframe -- anonymous orders, zero-value orders and cancelled orders are excluded, and so are orders in a currency other than your reporting currency. It is the same denominator the Blended CAC North Star tile uses, so the two always agree.

A CAC by Channel table appears further down the page when attribution is available, with each row flagged as Within floor or Above break-even relative to your break-even CAC.

The tile's subtext restates the arithmetic: total spend, then the new-customer count it was divided by.

LTGP (Lifetime Gross Profit)

LTGP is the profit a cohort of new customers generates within your chosen window. Each customer's orders are counted from their first order date up to the window length, so a 180-day window counts 180 days of that customer's purchases regardless of when they joined the cohort.

Read "gross profit" here the way MerchantFlow stores it on an order, which is further down the waterfall than the name suggests:

Order gross profit = Subtotal - Refunds - COGS - Allocated ad spend - Payment fee - Fulfillment cost

Shipping charged and tax are not in the numerator, and ad spend, payment fees and fulfillment already are. That makes LTGP a contribution-margin figure, and it is why LTGP per customer sits below what a revenue-minus-COGS calculation would give you.

The tile is labelled with the active window (for example LTGP (180d)) and shows:

• LTGP per customer as the headline value
• Cohort size - how many new customers seeded the calculation
• Total LTGP - aggregate gross profit from that cohort

Choosing a longer window will usually raise the LTGP number, since you are giving customers more time to repurchase.

LTV:CAC Ratio and Payback Period

LTV:CAC Ratio

The LTV : CAC tile shows the ratio to two decimal places and is colour-coded by health band:

The tile carries the reminder "Target: 3x+ for healthy unit economics". If you have new customers but no ad spend at all, the ratio is infinite and the tile shows the infinity symbol as Excellent.

CAC Payback Period

The payback tile shows how many months of cohort gross profit it takes to recover the acquisition cost:

Monthly LTGP = LTGP per customer / (LTV window in days / 30)
CAC Payback  = True CAC / Monthly LTGP

Because the denominator is derived from your LTV window, changing the window changes the payback figure. A 365-day window spreads the same per-customer profit across roughly twelve months instead of six, so it usually reports a longer payback than a 180-day window on the same data.

If the cohort has not yet generated any gross profit, the tile shows a dash and explains there is "No GP from cohort yet".

Break-Even Floor

The break-even card shows the floor that every new-customer order has to clear before paid acquisition stops bleeding cash:

• New-customer GM% - gross profit divided by revenue across first-purchase orders only, using the same order-level gross profit defined above
• Break-even ROAS - 1 / (GM% / 100). At a 40% new-customer gross margin that is 2.5x. Below this multiple, the first order loses money before LTV is considered. With zero or negative gross margin there is no ROAS that breaks even, and the tile shows the infinity symbol
• Break-even CAC - the average gross profit on a first order, floored at zero. CAC above this number must be justified by future repeat purchases

The break-even floor is the single number to optimise media bids against. If your platform CPA target is below break-even CAC, scaling will compound losses regardless of LTV.

New vs Returning Customer Split

The New vs Returning card breaks revenue and gross profit into:

Both cards list Revenue, Gross Profit, Orders, Unique customers, and AOV, plus one highlighted extra row:

• New Customers - first-time buyers in the timeframe, with gross profit per first purchase as the extra row.
• Returning Customers - customers with at least one prior order, with repeat order count as the extra row.

Returning customers usually contribute disproportionately more profit per dollar than new customers, because they carry no acquisition cost. The split makes that contribution visible.

CAC by Channel

When channel attribution is available, a CAC by Channel table shows:

Channels with no attributed new customers show a dash for CAC and a grey No attributed customers status. The card's subtitle restates your break-even CAC in dollars so you can read each row against it.

Per-channel CAC depends on order attribution being switched on for your workspace, which is an account-level setting rather than something you toggle yourself. When it is off, the CAC by Channel table does not render at all and a blue banner appears at the top of the page reading Channel CAC is not shown. followed by "Channel CAC is unavailable because attribution is disabled for this tenant. Blended CAC is still valid." Contact support if you want it enabled.

Frequently Asked Questions

How is true CAC different from the CPA shown in Meta or Google Ads?

Platform CPA only counts conversions the platform can attribute to its own clicks or impressions. True CAC divides all ad spend across all new customers in the period, including untracked and upper-funnel touches. That is why true CAC is almost always higher than platform-reported CPA.

Why do my LTGP numbers change when I switch from 90d to 365d?

The LTV window controls how long each cohort is tracked for gross profit accrual. Switching from 90 days to 365 days widens the observation window, so customers in the same cohort have more time to repurchase, which raises both total and per-customer LTGP.

What is a healthy LTV:CAC ratio for ecommerce?

A widely-cited benchmark is 3:1, and that is where MerchantFlow's Healthy band starts. Below 3:1 the ratio reads Thin, and below 1:1 it reads Unhealthy. At 5:1 and above it reads Excellent -- though a persistently very high ratio can also mean you are under-investing in growth.

Why does the page show "No new customers"?

If MerchantFlow finds zero new customers in the selected timeframe, an amber banner appears. This usually happens when the date range is too short, when orders have not yet synced, or when the dashboard is connected to a brand-new store.

Does Unit Economics depend on accurate COGS?

Yes. LTGP, new-customer GM%, and the break-even CAC all derive from the gross profit stored on each order, and COGS is the largest term in it. A missing product cost is booked as zero, which inflates every one of those figures. Before reading these numbers, make sure your COGS coverage is high.

Related Guides

• Cohort Analysis - retention and repurchase by acquisition month
• Customer LTV - per-customer lifetime value table with CAC and LTV:CAC ratio per customer
• Discount Codes - margin impact of every discount code you run
• COGS Management - keep gross profit calculations honest
• Ads and Channels - paid media performance feeding into CAC
• Attribution - how MerchantFlow assigns customers to channels

Last updated: August 29, 2026