🤔 Matt Bertulli, what’s a good conversion rate in 2026?
🤑 Abir Syed, what CAC + spend maximizes your profit?
And the question all of DTC is asking …
🤠 Sean Frank, what happened with my Postscript leak?
Plus the five top headlines in consumer.
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Matt Bertulli
CEO, Pela + Lomi
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What’s a Good Q4 Conversion Rate For Your Category?
Most CRO targest are one part educated and two parts guessing.
But it impacts everything. From your revenue forecast and budget allocation to your media strategy and inventory planning.
Heading into Q4, the stakes are even higher. Problem is, CRO shifts dramatically based on …
- Time of year
- Traffic source
- Category
How do you know what’s an accurate target?
Good news. Shoplift, the Shopify Plus Certified CRO platform, open sourced its data across 28 ecommerce categories.
You can access the benchmarks for free. Select a month and see any category’s median:
- Add-to-Cart Rate
- Conversion Rate
- Average Order Value
- Revenue Per Visitor
You can even drill down into one specific vertical to see the expected mid-level range for each of those metrics.
And the report provides a seasonal summary for your category with a proposed 12-month calendar.
Go dig in, find your numbers, and see if they align with your current Q4 targets.
While you’re there, request a free audit.
Shoplift will benchmark your store and send you a custom testing roadmap.
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Abir Syed
Cofounder, UpCounting
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What CAC + Spend Maximizes Your Profitability?
It’s the most important question in advertising.
Most operators give their media buyer targets based on last month’s CAC. Or they don’t provide any targets at all.
But what if we could determine your lifetime contribution margin at any spend + CAC?
That would allow us to …
- Set CAC targets by spend
- Scale around retention
- Maximize profitability
Today, I want to show you how to use your brand’s historical customer data to build a table that shows you lifetime contribution margin at every CAC + spend level.
I already created a model template for you here. It’ll take about 10 minutes.
First, The Problem
Spend and CAC move together.
As you spend more, returns diminish and CAC rises, but not linearly. A 10% rise in spend does not equal a 10% rise in CAC.
This relationship is both predictable and difficult to pin down.
You can set a CAC threshold (i.e., “I’ll only spend $200k if I can hold a $130 CAC”), but then you don’t know how long it’ll take to get there. You can set a spend threshold (i.e., “I’ll scale to $200k spend no matter what”) but then CAC is whatever the market decides to give you.
However, if we determine your new + returning …
- Retention curve
- Average order value
- Gross margin
… then we can work backward into a spend + CAC combination that is both realistic and highly profitable for your business.
To do that, we need to build a revenue forecast.
Forecast New vs Returning
New customer revenue is the single hardest thing to forecast in all of ecommerce. Returning customer revenue follows patterns you can observe in your historical data.
Isolating these two halves will give us a more accurate forecast.
Returning Revenue
This is the most reliable half of the forecast; it’s built off retention burndowns.
You can copy/paste the code in the “Shopify | Formula” tab into your Shopify account to pull a report.
Then export that report and paste it into the “Shopify | Cohort Export” tab. It should look like this.
This sheet will be using your own real historical data.
On the “Cohorts Model” tab, you’ll see every past month as a cohort, as well as how many of those same customers purchased again one month later, two months, three months, and so on.
A bit further down you will see these same cohorts, but as retention percentages.
For example, of our imaginary March cohort, 20% bought again in April, 14% bought in May, and 9% bought again in June.
With every cohort stacked this way, you can see your historical repurchase table month-to-month. The sheet will also calculate the average repurchase rate across every cohort.
However, it’s better to use weighted averages.
These factor in the number of customers for each cohort and give mathematical promience to bigger cohorts.
A 30% month with more customers deserves more weight than an 11% month with fewer.
Keep in mind this historical data is a reliable starting point, but future retention is a function of your activities and your plans.
If older cohorts retained worse than newer ones — perhaps you’ve been investing in retention — that blended average understates where you are now.
On the other hand, if you’re scaling aggressively, newer cohorts from higher up in the funnel may be less “sticky” than past cohorts.
You can manually adjust these averages for your forecast based on what you know about the business (try to be conservative).
We can now project how many repeat orders each new future cohort will generate over time. You can see this on the “Cohorts Forecast” tab.
In our example, we’re acquiring 1,778 new customers every month. According to the above averages, 436 customers from our August cohort would repurchase in September, 202 in October, 160 in November. In our September cohort, the same numbers play out just one month behind.
To turn this into revenue, all we need to do is scroll a bit lower where the sheet will multiply those repeat orders by our returning customer AOV (you need to enter this manually).
Let’s say our returning AOV is $98. If 436 customers from the August cohort repurchase in September, that’s $42,684 of returning revenue from that cohort in that month.
Returning revenue compounds every month according to the percentages we set earlier, while new customer revenue stays flat (assuming you’re not scaling acquisition).
New Revenue
For calculating new customer revenue, the formula is pretty straightforward:
New Customer Revenue = (Ad Spend ÷ CAC) × New Customer AOV
For simplicity, I’m keeping our CAC + spend identical month-to-month. That’s why our new revenue every month is also the same: $199,111.
If you’re scaling acquisition, these numbers will not be the same every month.
Now if we add a gross margin (we’ll use 70%), that will calculate our new and returning gross profit every month.
New holds steady at $139,378. Returning compounds.
Our ad spend every month is $160,000, so our new contribution margin is consistently negative at -$20,622 ($139,378 - $160,000).
However, our returning contribution margin more than makes up for us acquiring customers at a loss. By month two, our total contribution margin is already profitable.
New customers are acquired at a loss upfront, but the business is profitable. The below chart shows the entire economic engine of a high-retention brand.
Yours will look different. For example, competition gets aggressive when there’s a lot of lifetime profit available. Sometimes you might have to go very negative on acquisition, and it might take several months to break even.
That requires the proper cashflow strategy to make sure you can sustain that investment.
If you want me to do a full breakdown on my cash conversion cycle forecasting, just reply and tell Aaron to say nice things.
Maximize Contribution Margin
Now that we have this forecast, we can determine at what CAC + spend we will maximize our lifetime contribution margin. This also gives us correlated aMER and payback periods.
Operating off of a 12-month LTV, lifetime contribution margin at $60 CAC and $150k in spend is $189,494. If we want to increase spend to $210k, we need to keep CAC around $70 to maintain close to the same lifetime contribution margin.
The north star here is your contribution margin.
There’s no reason to overspend and let your lifetime contribution margin decrease. If you increase your spend, and your lifetime margin goes down, that means that those additional customers you acquired were at a lifetime loss, and what’s the point of lifetime unprofitable customers?
At the same time, if pulling back on spend allows CAC to come down enough that you can still make the same lifetime profit, then you should do that. What’s the point of spending more today to make the same amount of profit after 12 months?
There are three ways you can use this information.
1. Brief Your Media Buyer
Give your media buyer a table instead of a number.
Not “hold CAC at $70.”
Instead: at $150k in spend, I need $60. At $210k, I can accept $70. Above that, we should talk before you scale.
It also settles a common disagreement. Your buyer says they can spend more. You say CAC is too high. Both are usually true, because neither position defines what CAC is allowed to be at that particular level of spend.
With this table, it’s easier to read the writing on the wall.
2. Time Your Scaling
Push spend from $160k to $250k and CAC from $90 to $110 at month seven and your built up contribution margin can absorb a lot of that drawdown.
Make that identical increase in month three, before the base exists, and total contribution margin dips negative.
3. Invest in CAC
Part of the secret to maintaining a healthy CAC as you scale is that it requires investment.
- Creative testing
- More diversity
- Greater volume
If you’re spending $5,000 a month on creative and doing $100,000 in spend at a $100 CAC, it is probably not reasonable to model your way to $200,000 in spend at a $110 CAC six months from now while your creative budget stays at $5,000.
Alongside your increasing spend, also consider your rising investment in marketing infrastructure, because realistically that’s the only way to keep CAC under control as you scale.
Abir Syed is “DTC’s favorite CFO” for brands wanting to grow from 8–9 figures. He’s the cofounder of UpCounting. Connect with him on LinkedIn.
What Happened With My HexClad Tweet?
Everyone is asking so here is how it happened.
I was at Jason’s office at Hexclad, hanging out and talking about pans. We took a photo. I posted.
But I missed the screen behind us. The words were cut off. Nothing gets past ecom chads.
Postsript is rolling out email.
Beller spotted it - he told me not to delete it, said it was coming out anyway.
THAT IS WHAT HE GETS!
Did I mean to leak it?
No.
Am I sorry?
Absolutely not.
I am excited on what this means for Postscript and will see the live demo on September 23. Hope you join me there.
How Ecommerce Founders Get Rich: Exits, Dividends, Debt & Salary
Creators Over Reach: How to Rewrite Your Influencer Marketing
Curated by the editor of CPG Wire, the five top stories in commerce and DTC.
1. P&G Bets Big on Supplements: CNBC
Procter & Gamble expanded its health-and-wellness portfolio by acquiring Thorne for $3.8B. Founded in 1984 and based in South Carolina, Thorne is a vertically integrated supplement brand known for its clinically-backed formulations and high-quality products.
L Catterton took Thorne private for $680M in 2023, and today the company is on pace to deliver $650M in annual revenue. In January, P&G purchased Wonderbelly for an undisclosed sum.
2. Mimitime Officially Launches: Instagram
Mimitime, a creator-led konjac jelly snack brand, officially launched over the weekend. The company was co-founded by Priscilla Tsai, the founder of Cocokind, and Ava Lee, a beauty creator and the founder of wellness brand byAVA.
Mimitime is positioned as a Daily Korean Beauty Snack containing 1500mg of marine collagen, 30 calories, and only 3g of sugar. In addition to its DTC presence, Mimitime will launch exclusively at Target on August 16th.
3. Neutonic Closes Seed Round: LinkedIn
Neutonic closed its previously announced seed round with an additional 7-figure check from Redrice Ventures. Second Sight Ventures, an investor in Poppi, Lemme, and several other brands, also participated in the round.
The fast-growing supplement and energy drink brand has sold more than 7.5 million cans and delivered 300% year-over-year growth. Redrice Ventures has an impressive brand portfolio featuring Castore, Spacegoods, Mother Root, and Epetōme.
4. Axum Capital Partners Acquires Barcode: Business Wire
Charlotte-based private equity firm Axum has acquired a controlling stake in Barcode, the celebrity-backed sports drink brand. Existing investor and NBA All-Star Victor Wembanyama will remain a shareholder and brand partner.
Wembanyama originally invested in Barcode in 2023 when the company was valued at $30M. Barcode was co-founded by Kyle Kuzma and Mubarak Malik in 2021.
5. Kodiak Continues Growth Story: Twitter
Better-for-you breakfast specialist Kodiak has more than doubled in size since L Catterton acquired a majority stake in 2021. It expanded from three categories to seven and retail sales have grown from $200M in 2021 to a projected $580M this year.
With Kodiak, Good Culture, Mars Men, and California Naturals in its portfolio, L Catterton is poised for several fruitful years.
With thanks and anticipation,
Aaron Orendorff
🤓 Chief Executive Officer
P.S. (Disclaimer): Special thanks to Shoplift and Postscript for sponsoring today’s newsletter.