- Subscription Prescription
- Posts
- Dose #156: The One Metric Every Subscription Brand Needs to Obsess Over
Dose #156: The One Metric Every Subscription Brand Needs to Obsess Over
The data insight that unlocks scale
Matt here with your weekly Subscription Prescription 💊
Everyone wants data and everyone wants it to be accurate - with good reason. In this week’s dose we get into the real nitty gritty, and that’s profitability. Do you know, based on your CAC, LTV, and COGS, how much cash is actually coming back into your business? This week week go into all of that.
This week’s dose is also a podcast episode. Tune in or watch on your favorite platform:
The One Metric Every Subscription Brand Needs to Obsess Over
Most brands track CAC and LTV—but very few understand how to use them. In today’s dose, I’ll show you how to model profitability by cohort, why your best-selling SKU may not be your most profitable, and what benchmarks actually matter when you’re scaling. This isn’t just theory—it’s the foundation for predictable, scalable growth.
The Metric That Separates Amateurs from Operators
One of the biggest mindset shifts I see in brands that go from flailing to scaling is simple: they become obsessed with understanding CAC to LTV, not just revenue. When I say LTV, I mean margin after your cost of goods sold.
We’re also talking about tracking CAC by channel, LTV by cohort, and building time-bound profitability models to know exactly how much to spend, when to expect payback, and what to optimize next.
Why is this important? Because revenue hides a lot of sins. You can acquire tons of customers and still bleed cash for months if your margins and retention aren't aligned. Real operators are looking at payback windows, average margin per order, and the true profit curves for each channel or product they’re investing in.
I recommend starting with a simple framework: look at your CAC and LTV by cohort, plug in your average cost of goods (including shipping and fulfillment), and map profitability by month. Not just retention—but actual orders processed, dollars collected, and dollars kept. I’ve created a Google Sheet template that will help you do exactly this.
Not All Customers—and Not All SKUs—Are Created Equal
It’s easy to assume that your highest AOV SKU is your best acquisition play. That’s often wrong.
I’ve worked with too many brands that lean heavily on a high-margin product, only to realize those customers churn fastest—or never activate. On the flip side, a lower-margin SKU might create super-sticky customers who retain for six months or longer. But you only know that by tracking profitability by SKU and tying it back to LTV curves.
Once you’ve got your cohort model set up, you can break it down by acquisition path or SKU. The product that retains best might not be the most obvious one—and that insight alone can shift how you structure your entire offer strategy.
This doesn’t mean you need to turn everything on it’s head, however - strong retention products can be used for upsells and add-ons to make the products that get people in the door to stick around even longer.
You Can’t Optimize What You Don’t Time-Bound
Here’s one of the most common traps I see: brands chase LTV like it’s a magic number that climbs forever. The truth is, most of your LTV comes in the first 90 to 180 days. After that, every dollar comes at a steeper drop-off.
That’s why I recommend setting fixed time horizons: 90-day LTV, 120-day LTV, and for some businesses, 180. It gives you a tighter feedback loop, especially if you’re testing cancellation flows, bundles, or new onboarding. You can’t wait 9 months to see if a strategy worked.
And if you’re looking to scale paid acquisition, this becomes even more important. Your media buyers should be asking you for time-bound LTV and profit data. If they aren’t, they’re just guessing at what you can afford to spend. A 3:1 CAC-to-LTV ratio is great—but only if it pays back quickly. A 1.5:1 ratio can work too, but not if it takes six months.
Conclusion
The takeaway here is this: profitable subscription businesses aren't built on guesses. They’re modeled, tracked, and optimized based on real customer behavior, segmented over time.
I've linked a simple cohort modeling sheet here that you can copy and start using today. Plug in your CAC, AOV, retention by month, and cost of goods—and start seeing where your profit is actually coming from.
Until next Tuesday, that’s your Subscription Prescription. 💊
- Matt Holman 🩺
The Subscription Doc