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Target CPA: how to set acquisition targets from LTV and margin

A practical guide to target CPA: connect acquisition cost to LTV, contribution margin, and payback constraints (and avoid common mismatches).

Updated 2026-02-16

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Target CPA from LTV Calculator
Example: $3,000 revenue LTV, 60% margin, 20% buffer

Why target CPA is not one number

A CPA that looks great for one business can be disastrous for another. The right target depends on customer value (LTV), margin, and how quickly you need cash back (payback).

Break-even vs target CPA

  • Break-even CPA: the max you can pay and still make $0 profit on gross profit LTV (no buffer).
  • Target CPA: a more conservative number that leaves buffer for uncertainty, overhead, and measurement error.

Target CPA formula (simple model)

  • Break-even CPA = revenue LTV * contribution margin.
  • Target CPA = break-even CPA * (1 - buffer).
  • Use a payback cap if you need cash back within a fixed window.

Target CPA example

If revenue LTV is $3,000 and contribution margin is 60%, break-even CPA is $1,800. With a 20% buffer, target CPA is $1,440.

Best practices

  • Use gross profit LTV (or contribution after variable costs), not revenue LTV.
  • Validate incrementality as spend scales; attribution can overstate value.
  • Add buffer for refunds, fraud, churn shocks, and long payback cycles.

Common mistakes

  • Calling lead CPA 'CAC' without converting leads to customers.
  • Mixing fully-loaded CAC with revenue-based LTV (mismatch).
  • Setting a target CPA above break-even because short-window ROAS looks good.

FAQ

Should target CPA include fixed costs-
For campaign optimization, target CPA usually reflects variable economics. For business planning, you can set more conservative targets to cover fixed costs and desired profit.
What if my payback is too long-
Lower your target CPA, improve retention/expansion (raise LTV), raise margin, or change pricing. Long payback can make otherwise 'profitable' acquisition impossible due to cash constraints.

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