Subscription Margin Calculator
By Herzel MishelFounder, AgentisLast reviewed
Subscription economics look beautiful on a pitch deck and fragile in reality. The math depends on churn, and churn compounds: a 7 percent monthly churn rate means average customer lifespan of roughly 14 months, not the 24 or 36 months founders often assume. This calculator takes subscription price, COGS, fulfillment per shipment, monthly churn rate, acquisition cost, and processing fees, and returns contribution per shipment, expected lifespan in months, LTV, LTV/CAC ratio, and payback period. It is built for Shopify Plus subscription brands that need to stop quoting marketing-deck LTV and start quoting the real number that finance and investors will actually believe.
Inputs
Results
Contribution per Shipment
$24.65
Expected Lifespan
14.3 months
Lifetime Value (LTV)
$352.14
LTV / CAC Ratio
6.40×
Payback Period
2.2 months
What the Result Means
At 7 percent monthly churn (typical for a well-run consumer subscription) and a 26 dollar contribution per shipment, LTV lands around 370; against a 55 dollar CAC, that is a 6.7x ratio and a payback period near 2 months, which is excellent. At 12 percent monthly churn (more common for unproven categories) the same economics collapse: lifespan drops to 8.3 months, LTV to 215, and the LTV/CAC ratio to 3.9. At 15 percent churn, the business is structurally unprofitable against typical CAC levels. Churn is the single most sensitive variable in subscription economics and also the one most often quoted optimistically. The test founders should apply: take your best cohort's actual churn curve from month 1 through month 12 and model LTV from that, not from an assumed steady-state churn number. The difference between optimistic and realistic churn assumptions routinely swings LTV by 40 percent, which swings the fundability of the business.
How It's Calculated
Contribution per shipment is Subscription Price minus COGS minus Fulfillment per Shipment minus Payment Processing (Subscription Price multiplied by Processing Fee Percentage). This represents the dollars of contribution each recurring shipment generates after all variable costs. Expected lifespan in months uses the standard geometric-series approximation for churn: 1 divided by the monthly churn rate. At 7 percent monthly churn, expected lifespan is 1/0.07, or roughly 14.3 months, not the 24 or 36 months founders often assume. LTV is Contribution per Shipment multiplied by Expected Lifespan. LTV/CAC ratio is LTV divided by Acquisition Cost; industry standard health is 3.0 or higher. Payback months is Acquisition Cost divided by Contribution per Shipment, assuming monthly billing cadence. This model assumes constant monthly churn and a monthly billing cycle; if you bill quarterly or have cohort-variable churn, adjust the lifespan formula accordingly. It also does not include referral credits, pause-and-resume behavior, or upgrade/downgrade flows; subscription models with heavy flex dynamics need a cohort-based model, not a simple LTV formula.
The Gap This Calculator Reveals
Subscription margin erodes one shipment at a time, and the erosion is invisible until a cohort review weeks later. A raw material price increase, a freight zone shift, a new payment processor surcharge: any of these can quietly reduce contribution per shipment by a few dollars, and a three-dollar drop compounds across every shipment for every active subscriber. Agentis recomputes contribution per shipment against live cost data on every renewal order, flags cohorts that drop below your profit floor, and can hold below-floor renewal orders before fulfillment until a pricing action is taken. The calculator tells you what your subscription LTV should be; Agentis checks that each shipment actually delivers the contribution that assumption depends on.
Sources
Frequently Asked Questions
How do I calculate subscription LTV?
LTV equals contribution per shipment multiplied by expected customer lifespan. Contribution per shipment is subscription price minus COGS minus fulfillment per shipment minus payment processing, so it captures the dollars each recurring box actually generates after variable costs. Expected lifespan is approximately 1 divided by monthly churn rate; at 7 percent monthly churn, that is roughly 14 months. At a 26 dollar contribution and 7 percent churn, LTV lands around 370; against a 55 dollar CAC that is a 6.7x ratio. The lifespan approximation assumes constant monthly churn and monthly billing; if you bill quarterly or churn varies by cohort, adjust the lifespan formula accordingly. Use contribution, not revenue, to avoid overstating. The most reliable input is your best cohort's actual churn curve from month 1 through 12, since optimistic versus realistic churn routinely swings LTV by 40 percent. Enter your own price, costs, and measured churn to see your LTV and LTV/CAC ratio.
What is a healthy LTV/CAC ratio for subscription?
3.0 is the standard floor, 4.0 to 6.0 is healthy, and anything above 6.0 suggests you may be under-investing in acquisition. In this calculator, LTV/CAC is LTV divided by acquisition cost, where LTV is contribution per shipment multiplied by expected lifespan in months. At 7 percent monthly churn and a 26 dollar contribution per shipment, LTV is around 370, and against a 55 dollar CAC the ratio is 6.7x with payback near 2 months. At 12 percent churn the same economics fall to an LTV of 215 and a ratio of 3.9; at 15 percent churn the business is structurally unprofitable against typical CAC levels. Below 3.0, the business will struggle to scale profitably. Because the ratio depends so heavily on lifespan, an optimistic churn assumption can make a sub-3.0 business look healthy on paper. Run your measured cohort churn here and read the ratio alongside the payback period output.
Why does monthly churn matter so much?
Because it compounds. Expected lifespan is 1 divided by monthly churn, so every point of churn shortens the number of shipments each customer pays for, and LTV falls in proportion. A 7 percent monthly churn gives 14 months of expected lifespan; 12 percent gives only 8 months. At 7 percent churn and a 26 dollar contribution, LTV is around 370; at 12 percent it drops to 215. That 5-point churn gap roughly halves LTV and can turn a fundable business into an unfundable one. Founders often assume 24 or 36 months of lifespan when the math supports roughly 14. The difference between optimistic and realistic churn assumptions routinely swings LTV by 40 percent. Measure actual cohort churn, not assumed steady state. Pull your best cohort's month 1 through month 12 churn curve and enter that rate here to see what your LTV actually supports.
How does Agentis protect subscription margins?
Agentis monitors contribution per shipment against live COGS, fulfillment, and processing cost on every renewal order, flags cohorts that fall below your profit floor, and can hold below-floor renewal orders before fulfillment until pricing is corrected. Subscription margin erodes one shipment at a time, and the erosion is usually invisible until a cohort review weeks later. A raw material price increase, a freight zone shift, or a new payment processor surcharge can each trim contribution per shipment by a few dollars, and a three-dollar drop compounds across every shipment for every active subscriber. Because LTV in this calculator is contribution per shipment multiplied by expected lifespan, any sustained drop in contribution lowers LTV and lengthens payback for the whole base. The calculator tells you what your subscription LTV should be; the per-order check makes sure each shipment delivers the contribution that assumption depends on. Use the contribution per shipment output here as the floor you want renewals measured against.
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