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Methodology

Conversion Economics Planner methodology

Translate traffic and conversion assumptions into customers, CAC and campaign contribution.
Duc Nguyen X.By Duc Nguyen X.· Founder, Margin101Last reviewed: View update historyMethodology

Educational only: Business decision support, not accounting, tax or legal advice.

Privacy: Calculations run locally; Margin101 does not receive your commercial inputs.

Update policy: Reviewed when formulas or official dependencies change.

Scope: Market-neutral small-business planning using your own assumptions.

1. Formulas and units

Expected Customers
expectedCustomers = traffic × conversion rate

Where

traffic
Traffic (whole or operational units)Source: Business record
conversionRate
Conversion rate (decimal rate)Source: Business record
expectedCustomers
Expected Customers (units)Source: Calculated output
Gross Contribution
grossContribution = expected customers × contribution per customer

Where

contributionPerCustomer
Contribution per customer (currency units on one consistent basis)Source: Business record
expectedCustomers
Expected Customers (units)Source: Calculated output
grossContribution
Gross Contribution (money)Source: Calculated output
Total Acquisition Cost
totalAcquisitionCost = media spend + fixed acquisition cost

Where

mediaSpend
Media spend (currency units on one consistent basis)Source: Business record
fixedAcquisitionCost
Fixed acquisition cost (currency units on one consistent basis)Source: Business record
totalAcquisitionCost
Total Acquisition Cost (money)Source: Calculated output
Campaign Contribution
campaignContribution = gross contribution − total acquisition cost

Where

grossContribution
Gross Contribution (money)Source: Calculated output
totalAcquisitionCost
Total Acquisition Cost (money)Source: Calculated output
campaignContribution
Campaign Contribution (money)Source: Calculated output
CAC
cac = total acquisition cost ÷ expected customers

Where

expectedCustomers
Expected Customers (units)Source: Calculated output
totalAcquisitionCost
Total Acquisition Cost (money)Source: Calculated output
cac
CAC (money)Source: Calculated output
Allowable Total Spend
allowableTotalSpend = gross contribution

Where

grossContribution
Gross Contribution (money)Source: Calculated output
allowableTotalSpend
Allowable Total Spend (money)Source: Calculated output
Allowable Cost Per Visit
allowableCostPerVisit = contribution per customer × conversion rate

Where

conversionRate
Conversion rate (decimal rate)Source: Business record
contributionPerCustomer
Contribution per customer (currency units on one consistent basis)Source: Business record
allowableCostPerVisit
Allowable Cost Per Visit (money)Source: Calculated output

Money inputs and outputs use the currency selected in the scenario without changing the canonical methodology. Rates, margins, utilisation and buffers are entered as percentages and converted to decimal values for calculation.

2. Worked example

Input assumptions

Worked values below come from the same registered engine and visible default assumptions.

Calculation and outputs

Example

Worked values below come from the same registered engine and visible default assumptions.

Expected Customers
200
Gross Contribution
6,000.00 currency units
Total Acquisition Cost
2,000.00 currency units
Campaign Contribution
4,000.00 currency units
CAC
10.00 currency units
Allowable Total Spend
6,000.00 currency units
Allowable Cost Per Visit
0.60 currency units

The exact engine-derived outputs are shown in the labelled rows below.

Interpretation

Campaign contribution translates the entered traffic and conversion rate into customers before subtracting acquisition cost.

3. Validation and boundary checks

  • All inputs must be finite and non-negative unless the formula explicitly permits a negative calculated profit or gap.
  • Rates must remain between 0% and 100%; horizons and declared counts use the exact whole-number boundaries shown by the inputs.
  • Zero denominators return an explicit unreachable state rather than Infinity, NaN or a numeric sentinel.
  • Compared records must use one consistent attribution, contribution, period and currency basis.

4. Assumptions and source classification

  • Retention, conversion, attribution and incrementality are user assumptions rather than causal claims.
  • Customer value is contribution-based and bounded to the selected finite horizon.
  • No provider rate, market benchmark, country rule or policy constant is embedded.

This planner has no current policy-data dependency. Its commercial assumptions are user supplied. Registered family-level regression suites exercise the shared business-logic engine and worked-result reconciliation.

5. Limitations

  • The workflow does not forecast demand, retention, conversion or campaign performance.
  • It does not replace financial, accounting, tax or legal advice.

This is educational decision support, not tax, accounting, legal or financial advice. Check the treatment of your actual transactions under the rules that apply to your business and seek qualified advice where appropriate.

6. Update and evidence policy

Registered family-level suites test formula invariants and example reconciliation; the release ledger records that coverage without claiming a separate oracle for every line of public copy. There is no official threshold or benchmark to refresh for this planner. Commercial inputs remain user-supplied because they vary by business and contract.

Change history

  1. : Initial public release of the Conversion Economics planner and methodology.

Related reading

Guides to interpret the decision and its assumptions.

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