Subscription vs One-Time Products: Modeling LTV, Payback Period, and Cash Flow to Choose the Right Ecommerce Business Model

Choosing between subscriptions and one-time products is not a branding decision. It is a math problem. The fastest way to a confident answer is to model lifetime value, CAC payback, and cash flow against your product economics and fixed costs. This guide gives you the core formulas, fresh benchmarks, and a practical workflow you can run in minutes with the free Break-Even and Profit Analysis tool at FullyCounted.

Why this choice matters more in 2025

Recurring revenue has proven resilient, but it is not a free pass. According to the Zuora Subscription Economy Index, companies with recurring monetization grew revenue 10.4 percent in 2023 and 3.4 times faster than the S&P 500 over the last 12 years. At the same time, the subscription market is maturing. The SUBTA 2024 report notes active subscribers in the United States declined about 10 percent year over year, with consumers demanding flexible plans and clear value.

Within ecommerce subscriptions, performance varies by category. Recharge’s State of Subscription Commerce 2024 shows strong gains in Beauty and Personal Care across AOV, LTV, and MRR, while Home and Pets cooled but still benefited from sticky behavior among pet owners. The signal is consistent. Subscriptions work best where repeat use is natural and perceived as essential.

LTV fundamentals: subscription vs one-time

For non-contract ecommerce, Shopify’s CLV guide uses a simple and reliable formula: Average Purchase Value times Purchase Frequency times Average Customer Lifespan. This is ideal for one-time or repeat-purchase brands without formal subscriptions, since it reflects observed buying behavior.

Subscription LTV is typically modeled from revenue and churn. As Paddle’s ProfitWell documentation explains, a common approximation is ARPU divided by churn, often adjusted by gross margin or retention smoothing to avoid volatility. A practical version many operators use is:

• Subscription LTV = ARPU per month times gross margin percent times expected lifetime in months, where expected lifetime is roughly 1 divided by monthly churn.

Two cautions matter. First, churn drives the model. A small change in monthly churn can swing LTV dramatically, so use cohort data if possible. Second, include gross margin. Revenue is not cash you keep.

CAC payback: the clock that runs your growth

CAC payback shows how long it takes gross margin from a new customer to repay acquisition costs. Faster payback improves cash velocity and reduces financing risk. OpenView’s CAC payback guide recommends modeling it as Sales and Marketing expense for the period divided by Net New MRR times gross margin. For ecommerce, translate that to your average first order gross margin plus expected contribution from early repeat orders or first subscription cycles. OpenView also notes that 12 months is often cited as excellent, but appropriate targets depend on your motion and retention.

Remember that CAC itself is not static. Shopify’s research cites average CAC ranges of 127 to 462 dollars depending on industry, which is why improving retention and early order economics can make or break payback.

Cash flow and the cash conversion cycle

Even a great LTV does not solve a cash crunch. If your business buys inventory and pays suppliers before collecting from customers, your working capital timing matters. As Shopify’s explanation of the cash conversion cycle describes, CCC equals Days Inventory Outstanding plus Days Sales Outstanding minus Days Payable Outstanding. A shorter or negative CCC means customer cash arrives before you pay vendors, which can fund growth. Inventory-heavy one-time businesses may need faster CAC payback or stronger front-end margin to stay liquid. Subscription boxes with prepaid billing and predictable procurement can approach neutral or negative CCC if terms and fulfillment are dialed in.

A quick modeling workflow you can run today

Use this simple workflow to compare subscription vs one-time for a single product or small catalog before you scale spend:

1. Estimate unit economics and break-even. Enter your product cost, selling price, and monthly fixed expenses into the free calculator at FullyCounted to see contribution margin, monthly break-even units, and profit at different sales levels. Save the scenario and export a report for your planning doc.

2. Build an LTV range. For one-time, use the Shopify formula with conservative assumptions for purchase frequency and lifespan. For subscription, use Paddle’s ARPU over churn concept, multiply by gross margin, and test 3 churn cases: optimistic, expected, and stress.

3. Model CAC payback. Translate your CAC estimate and early order gross margin into a month-by-month cash timeline. For subscriptions, apply OpenView’s payback logic by dividing CAC by monthly gross margin contribution. Pressure test how discounting, prepaid plans, or bundling change time to payback.

4. Check cash flow sensitivity. If you hold inventory, apply Shopify’s CCC concept to see if purchase timing forces additional working capital. If it does, either shorten your CCC, negotiate terms, or insist on faster payback in the model.

5. Decide by the numbers. If subscription LTV and payback beat your thresholds and you can maintain logistics and experience that keep churn low, subscription likely wins. If usage is episodic and inventory cash needs are high, a one-time or hybrid approach may be safer.

When subscriptions outperform

Subscriptions shine where repeat use is habitual and you can deliver ongoing value with low friction. The category data from Recharge’s 2024 review highlights strong LTV and MRR lift in Beauty and Personal Care, a space where replenishment is natural and upsell is frequent. The Zuora SEI also shows recurring businesses maintaining higher growth than the S&P 500, with lower churn than the previous three years. Prepaid multi-month plans can accelerate CAC payback, reduce churn, and improve cash flow, especially if you layer loyalty perks that reinforce stickiness.

When one-time is the better first step

If your product is infrequently purchased, highly seasonal, or requires long consideration, forcing a subscription can inflate CAC and drive cancellations. The SUBTA 2024 findings show more scrutiny from consumers, which penalizes weak Subscribe and Save offers. In these cases, build repeat purchase loops with bundles, refills, and post-purchase email flows. You can pilot a subscription for a replenishable SKU later, once you have clear retention signals and a realistic churn curve.

Small levers that swing the model

• Increase ARPU early. A welcome bundle or cross-sell adds gross margin that shortens payback.
• Reduce churn before it happens. Skips, swaps, and pausing options often lower active churn, a tactic the Recharge report encourages.
• Improve gross margin. Packaging efficiencies and better terms translate directly into higher LTV and faster payback.
• Offer prepaid or longer commitment plans. Upfront cash pulls payback forward and usually improves retention.

Put it into motion

Open a tab and plug your numbers into the free, zero-friction calculator at FullyCounted. Start with your product cost, price, and monthly fixed expenses. Then extend the model with a conservative LTV, churn, and CAC payback scenario for subscription and one-time. If you are ready to set up your store and test in the wild, Shopify gives you a fast launch path and a deep app ecosystem for both one-time and subscription selling. The best model is the one you can operate profitably, with cash flow you can sustain and a payback clock you can consistently beat.