Core Metrics
60–65%
Product Gross Margin
Before paid media & overhead
25–35%
Contribution Margin
After paid acquisition costs
3–5x
LTV:CAC Target
Healthy range for DTC
$25–35
Target CAC
Break point ~$35–40
60–90 Days
CAC Payback Period
Target range
Purchase #2
Biggest LTV Lever
Cuts effective CAC in half
Scenario Breakdown
| Scenario |
CAC |
Gross Margin |
Contribution Margin |
Health |
| Best Case — Low CAC + repeat purchase |
$25 |
65% |
~35% |
Strong |
| Base Case — Normal paid media |
$30–35 |
60–65% |
~25–30% |
Acceptable |
| Break-Even Risk — CAC creep, no repeat |
>$40 |
55% |
~10–15% |
At Risk |
| One-and-Done Customer — Worst case |
$50+ |
55% |
~Break Even |
Losing |
Where It Works vs. Where It Breaks
✅ Where It Works
60–65% gross margins — strong DTC foundation to work with
Second purchase unlocks the model — effective CAC cuts in half, profitability opens up
Subscription or loyalty mechanic — if you get one, LTV:CAC hits 4–5x easily
Organic + referral blended in — blended CAC drops, contribution margin expands
⚠️ Where It Breaks
CAC > $35–40 without repeat purchase — you're basically buying customers at cost
One-and-done buyer at $50 CAC on 55% margins = near break-even or losing
No retention mechanic — post-purchase flows, sub offers, loyalty = must-haves not nice-to-haves
Scaling paid before LTV is proven — dangerous if repeat rate is unknown
Bottom Line
The unit economics are solid on paper — 60–65% margins give you room to work with. The model becomes a real business the moment you solve repeat purchase. Right now the #1 priority is getting customers to buy twice. That single move drops effective CAC in half and turns a marginal unit into a healthy one. Without it, you're on a treadmill — acquiring customers to break even.
⚠️ Numbers sourced from Bad_Habit_Financial_Model.pdf (19 pages). Send actuals if you want this refreshed with real data.