Apr 17, 2025

How to set a MER band your CFO will back (with examples)

If you’ve ever heard “we can’t afford that ROAS,” this post is for you. A clear MER band translates your margins into a budget guardrail finance will actually support. Once the band is set, you’ll scale faster—with fewer debates.

TL;DR

  • MER floor = 1 ÷ Allowed Marketing Share (AMS%) of revenue.

  • AMS% = Contribution Margin % − Post-marketing contribution (PMC%).

  • Create a band (floor → floor + 10–15%) and require iMER ≥ floor to scale.


Step 1 — Build Contribution Margin %

Use net revenue. Subtract variable costs:

  • COGS

  • Shipping/fulfillment + payment fees

  • Discounts/returns

  • Other variable ops

CM% = 1 − (COGS% + shipping/fees% + discounts/returns% + variable ops%)

Step 2 — Choose a post-marketing goal (PMC%)

  • Break-even acquisition: 0%

  • Cover some fixed costs: 10–15%

  • Profit target: 20%+

Step 3 — Calculate Allowed Marketing Share (AMS%)

AMS% = CM% − PMC%

This is the max % of revenue you can spend on marketing while hitting your goal.

Step 4 — Set MER floor and band

MER floor = 1 ÷ AMS%

Add a modest buffer to get your band (e.g., floor to floor + 10–15%).


Worked examples

  • Low-margin brand: CM% 30%, PMC% 10% → AMS% 20% → MER floor 5.0 → band 5.0–6.0

  • Mid-margin brand: CM% 45%, PMC% 15% → AMS% 30% → MER floor 3.33 → band 3.3–3.8

  • High-margin / strong LTV-90: CM% 55%, PMC% 10% → AMS% 45% → MER floor 2.22 → band 2.2–2.6


Tip: If you manage to pLTV-90, include that revenue in your net revenue for CM%—it usually lowers the MER you must hold.

Make it operational (weekly)

  • Approve budgets on MER; optimize tactics on ROAS.

  • Track MER, iMER, blended CAC, payback, pLTV-90, contribution on one page.

  • Scale only while iMER ≥ MER floor; if it slips, fix creative/offer/funnel before adding spend.

Pitfalls to avoid

  • Using gross revenue (inflates MER).

  • Double-counting discounts.

  • Ignoring shipping/fees.

  • Applying one band to all markets—set bands per country when margins/logistics differ.

Copy-paste template

  1. Compute CM%

  2. Pick PMC%

  3. AMS% = CM% − PMC%

  4. MER floor = 1 ÷ AMS% → set band = floor → floor + 10–15%