We’ve all watched videos from influencers like Michelle Phan or Huda Kattan, and we know that being featured in one of their vlogs can significantly boost a business. However, when it comes to collaborating with influencers of any size, many of us struggle to understand how these relationships work, especially regarding our influencer marketing budget.

Well, thanks to Cheyenne, the Content Marketing Manager here at Cratejoy, we’ve got a handy little bit of math to help you decipher when working with an influencer is the right choice for your business.

First, a few tips for vetting influencers:

  • Engagement is important! Look at whether or not they’re engaging their followers. Are they commenting on posts? Are they asking questions? How is the feedback from their followers and what do those conversations look like?
  • Cohesion is important! Ensure there is some consistency in the size of their following on the different platforms they use. If they have a large following on Instagram but only a few followers on YouTube, it might mean they gained those YouTube followers through bots or similar methods, which isn’t ideal.

Step 1: Calculate Potential Conversions

For this example, we’re looking at working with an influencer who has 100,000 unique monthly views (UMV).

Make two estimates:

  1. The number of people who think might see a post from this influencer.
  2. The number of people you think will convert (purchase a product) from that same post.

As a conservative estimate, we’re going to assume 1% for each of these – it’s a safe bet to make until you’ve actually worked with a specific influencer a time or two and know more about how their followers will convert.

So, of the 100,000 UMV for this influencer, the assumption is 1%, or 1,000 of those visitors might see the post.

The math: 100K X 1% = 1,000 visitors might see the post

Of that 1,000 visitors who might see the post, the assumption is that 1%, or 10, will convert and purchase your subscription.

The math: 1,000 X 1% = 10 of those who saw the post might purchase a subscription

Step 2: Calculate LTV CAC

A customer’s Lifetime Value (LTV) and the cost to acquire them (CAC) are extremely important metrics to track overall, and are necessary to know when calculating your influencer marketing budget.

To make, we need to know two things:

  1. Subscriber Lifetime Value (LTV) = The total $ amount attributed to the average customer throughout the lifespan of their membership.
  2. Customer Acquisition Cost (CAC) = The $ amount you spend acquiring a new customer.

For this example, we’ll assume the following for calculating LTV:

  • Box Cost = $45
  • Profit Margin = 35%
  • Average Customer Lifetime = 4 months


The math: $45 X .35% = $15.75 X 4 months = LTV of $63

Now, we divide our LTV from above ($63) by 3. Why? Because the ideal CAC:LTV ratio is 1:3 – meaning, for every dollar you spend on acquiring a customer, you should be making 3X that in the LTV.

The math: $63/3 = CAC of $21

Step 3: Calculate Influencer Marketing Budget & Profit

Now, we’re ready to calculate the budget we have to work with this influencer. To do this, multiply CAC by the # of estimated conversions.

The math: $21 X 10 = $210 influencer marketing budget

…and what will your profit be should those 10 new subscribers actually convert? Subtract the CAC for those 10 potential conversions from the LTV for those same 10 potential customers.

The math: ($63 X 10) – ($21 X 10) = ($630 – $210) = $420 profit