A useful break-even customer acquisition cost is the contribution a new customer can generate inside an agreed payback window—not simply average order value multiplied by gross margin.
Define the customer and the window
Choose whether the model is for a first-time buyer, qualified lead or activated account. Then choose the period in which acquisition should repay itself. A lifetime estimate without a cash window can hide a financing problem.
Use net contribution inputs
Begin with net revenue after discounts, cancellations and returns. Subtract product cost, fulfilment, payment cost, support and other genuinely variable costs. Add repeat contribution only when cohort evidence supports it.
Create three thresholds
Keep a break-even ceiling, a target CAC that funds overhead and growth, and a stretch-test threshold used only for bounded experiments. One number cannot serve every decision.
The decision to make next
Put the assumptions in one shared sheet, name their source and update the threshold when margin, return rate, repeat behaviour or the payback requirement changes.