CUSTOMER ACQUISITION COST
How much did you spend to get one new customer?
Use costs and customers from the same period. Otherwise the result is misleading.
FORMULA
Customer acquisition cost formula
Add the sales and marketing costs that helped acquire new customers, then divide by the number of customers first acquired in that period.
EXAMPLE
$12,000 spent to acquire 60 customers
$8,000 of marketing spend plus $4,000 of sales spend equals $12,000. Dividing it by 60 new customers gives a CAC of $200.
- Total spend
- $12,000
- New customers
- 60
- CAC
- $200
WHAT MAKES CAC USEFUL
Compare CAC with what a customer gives back.
Use gross profit for payback. Revenue alone makes the recovery period look better than it is.
CAC paybackCAC ÷ monthly gross profit per customer
LTV to CACCustomer lifetime value ÷ CAC
Track the trendKeep the period and cost definition consistent
QUESTIONS
CAC questions
How do you calculate customer acquisition cost?
Add every sales and marketing cost for a defined period, then divide it by the number of new customers acquired in that same period. CAC = (marketing spend + sales spend) ÷ new customers.
What costs should be included in CAC?
Include paid media, agency fees, sales and marketing payroll, commissions, software, creative, events, and the other costs needed to win customers. Use the same definition every period so the trend stays useful.
What is the difference between CAC and CPA?
CPA usually measures the cost of a campaign action, such as a lead or purchase. CAC measures the full business cost of acquiring one new customer, including sales costs and overhead related to acquisition.
What is a good LTV to CAC ratio?
A ratio near 3:1 is often used as a starting point for subscription businesses. The right ratio depends on your gross margin, retention, cash position, and how quickly you recover acquisition cost.
How is CAC payback calculated?
Divide CAC by the monthly gross profit from one customer. Using gross profit, rather than revenue, accounts for the direct cost of serving that customer.