MARKMAMarketing math

Methodology

Updated: 2026-09-25

This methodology describes the actual behavior of all 15 MARKMA calculators: their formulas, variables, units, versions, rounding rules, limits and exclusions. The interface does not maintain duplicate formulas. All 15 calculators use formula version 1.0. When a formula changes, its version, metric-page example and review date are updated.

Shared notation

  • AOV — average order value, currency per sale.
  • VC — variable costs per sale, in the same currency.
  • TX — taxes and fees tied to a sale, entered by you.
  • S — the share of contribution the business is willing to spend on acquisition, from 0 to 1 (entered as a percentage in the interface).
  • CR1 — click-to-lead conversion, from 0 to 1; CR2 — lead-to-sale conversion.
  • N — purchases per customer over the selected horizon; for a first purchase, N = 1.
  • Ad — advertising spend; CAC, CPL and CPC are acquisition costs.

Unit economics and sales

  • Contribution per sale = AOV − VC − TX. This is the amount available for advertising, fixed costs and profit (the Acquisition Economics tool).
  • Contribution margin = (AOV − VC − TX) ÷ AOV. It is shown as a percentage and can be negative when variable costs and taxes exceed the average order value. Contribution is a currency amount per sale; contribution margin is that amount divided by AOV. They share a sign but use different units.
  • Margin = (price − unit cost) ÷ price; markup = (price − unit cost) ÷ unit cost. With positive unit profit, margin is less than markup. If price is below cost, both are negative and their ordering reverses. A ratio with a zero denominator is unavailable (Margin and Markup).
  • Price for a target margin = unit cost ÷ (1 − target margin). A target margin of 100% or more is unreachable; the tool reports this instead of returning infinity.

Affordable acquisition costs

  • Maximum CAC = LTVc, the contribution over the chosen horizon: one sale for the first-purchase horizon, or contribution per purchase × N for the full horizon. Acquisition above this limit is not repaid by contribution.
  • Target CAC = LTVc × S. With S = 30% and LTVc = 2,000, target CAC is 600 and 1,400 (the 1 − S share) remains for the business. For three purchases with contribution of 2,000 each, LTVc = 6,000 and target CAC at S = 30% is 1,800.
  • Maximum CPL = LTVc × CR2; maximum CPC = LTVc × CR2 × CR1.
  • Target CPL = target CAC × CR2; target CPC = target CPL × CR1. These limits use the same horizon as LTVc, so changing the horizon also changes the derived CPL and CPC limits.
  • Observed costs = CAC = Ad ÷ customers, CPL = Ad ÷ leads and CPC = Ad ÷ clicks. Each cost uses its own denominator. A zero denominator makes the result unavailable.
  • Budget = customers × target CAC. At the first-purchase horizon, new customers equal first sales; the lead-to-sale conversion is not needed at that step.

Sales funnel targets

Revenue targets become funnel requirements by rounding up at every step:

  1. sales = ceil(revenue target ÷ AOV);
  2. leads = ceil(sales ÷ CR2);
  3. clicks = ceil(leads ÷ CR1).

Sales, leads, clicks and break-even units are rounded up. An advertising budget is a product and is not rounded.

Payback and advertising returns

  • ROMI = (contribution attributed to sales − Ad) ÷ Ad. ROMI of 0% means the budget was recovered with no additional profit. Negative ROMI is a measured loss, not an input error.
  • ROAS = attributed revenue ÷ Ad. ROAS uses revenue and does not, by itself, answer whether advertising paid back.
  • LTV (contribution) = contribution × N; LTV:CAC = LTV ÷ CAC. Do not compare contribution LTV:CAC with ratios based on revenue.
  • Customer payback period = CAC ÷ contribution per period. This is the number of periods needed for contribution to repay acquisition cost and can be fractional: 3,000 ÷ 2,000 = 1.5 periods. It is not rounded up.
  • Break-even units = ceil(fixed costs ÷ contribution per unit); break-even revenue = units × price.

Discount impact

  • Contribution after discount = price × (1 − discount) − VC.
  • Required volume multiplier = contribution before discount ÷ contribution after discount. This is how many times sales volume must grow to keep profit unchanged. The percentage increase is the multiplier minus 1; a multiplier of 1.5 means a 50% increase. If contribution after discount is zero or negative, no increase in volume can preserve profit, and the tool reports that rather than returning infinity.

Units and precision

  • Money uses exact arithmetic; intermediate values do not lose minor units or depend on binary floating-point rounding.
  • Percentages are entered from 0 to 100 and used as ratios internally. They are converted back to percentages only for display.
  • Rounding happens once, at display, using half away from zero. Intermediate calculation values are not rounded.
  • Numeric input has an explicit grammar. Group separators must appear every three digits (space, non-breaking space or narrow non-breaking space). Invalid grouping such as 1 2 is rejected rather than concatenated. The field limit is 15 integer digits, 6 fractional digits and 48 characters. Amounts are capped at 1,000,000,000,000; counts at 1,000,000,000.

Bounds and zero cases

  • When division is undefined (zero clicks, leads, customers or denominator), the result is marked unavailable with a reason. The calculator never shows Infinity, NaN or zero in place of an unavailable result.
  • An explicitly entered zero differs from an empty field. Negative spend, counts, order values, prices and conversion rates are rejected. Conversion cannot exceed 100%. Invalid digit grouping is rejected.
  • contribution ≤ 0 is shown as a loss, not treated as an input error. The calculator explains that unit economics do not cover variable costs and taxes.

First purchase and repeat purchases

The horizon is always explicit. For a first purchase, N = 1. For all purchases over a longer horizon, you enter N ≥ 1; a fractional expected number, such as 1.5, is allowed. Negative purchase counts are rejected. Results for the first purchase and full horizon are separate because the affordable CAC depends on which purchases are included.

Scenarios and sensitivity

  • Base economics are explicit. Automatic scenarios show an illustrative ±10% band, bounded by the allowed range of the input.
  • Custom deviations have an absolute limit of ≤ 0.5 and are clamped to [0, upper bound]; there can be at most 8 scenarios.
  • Sensitivity scans use 2 to 25 steps.
  • When comparing channels, core economics (order value, variable costs, taxes and horizon) stay the same; traffic cost and conversion rates change. The assumptions appear beside the result.

Calculation state is encoded in the URL fragment after # (format #r=…). Encoded state is limited to 8,192 characters. The fragment is applied in full or rejected in full; unknown, extra or incomplete values are never partly applied. State links are excluded from search indexing and are not sent to the server in ordinary navigation. Browser printing and PDF saving include the entered parameters and result.

Limits

Calculations are informational and are not financial, investment, legal or tax advice. You provide taxes, fees and the share S. MARKMA does not publish industry benchmarks without a verifiable source and does not substitute market averages for your data.