It feels like every e-commerce brand has a subscription you can sign up for, which to a customer can seem annoying, but from a brand’s perspective there is a practical reason. Subscribers on most businesses are 3.5x as profitable because of their lifetime value. Additionally, they provide predictable monthly revenue.. 

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How much to pay for a subscriber is totally dependent on these factors: 

• Total revenue coming in
• Overall profitability of the business (aiming for 20% or higher, but varies by industry & business size) 

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If your revenue is healthy and your profitability is managed, the industry best practice is to pay acquisition costs equivalent to a number between your 6-month LTV and up to your 12 month LTV, on a new customer.

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If there isn’t a ton of revenue coming in and profitability is tight, the less availability you have to optimize to a 6-month+ LTV CAC goal. In that case, you can likely acquire a customer with the goal of being break-even on first purchase or possibly stretch this out to a 3-month LTV.his may come with less ability to scale acquisition for new high-quality subscription customers. 

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If you aren’t sure where you sit profitability wise for calculating your ideal CAC, you can download our FREE guide here, which will help you determine where you stand

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All you have to do is input your current CAC from the past month and the amount of revenue you drove as a business. Then add the new customer and return customer revenue from that previous month to determine your net profit. If net profit is around 20% or higher, you are in a solid place to start looking at a longer LTV to CAC ratio. 

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The last piece to consider is making sure that you are getting at least 3 purchasers or more on average from every subscriber. If you are seeing high churn, this is a sign that you aren’t acquiring high-quality customers and should consider a more conservative CAC goal. 

If you want to determine your CAC goals for your subscription business and attract high- quality customers, download our FREE Know Your Numbers sheet today!

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