Customer Acquisition Cost (CAC) Calculator

How to calculate customer acquisition cost

1. Choose a period – a month or a quarter.
2. Add every cost of winning new customers in that period: marketing and sales.
3. Count the new customers acquired in the same period.
4. Divide total cost by new customers.

Example: a business spends $30,000 on marketing and $20,000 on sales in a quarter and wins 250 new customers. CAC = $50,000 ÷ 250 = $200. Every new customer costs $200 to acquire.

What to include in CAC

Be consistent. A 'paid CAC' that counts only ad spend will look much lower than a fully loaded CAC that includes salaries and tools – both are useful, but compare like with like. For more on what CAC tells you and how to bring it down, read our customer acquisition cost guide.

Blended CAC vs paid and channel CAC

Blended CAC divides all acquisition costs by all new customers, including those who found you through search, referrals or word of mouth. It shows overall efficiency but can hide expensive channels. Paid CAC looks only at paid media and the customers it brought in: if $12,000 of ads produced 80 customers, paid CAC is $150. Channel CAC goes further – Facebook, LinkedIn, TikTok or YouTube separately – so you can move budget to the channels that work. Our ad budget calculators help you plan spend per channel.

CAC, lifetime value and payback

CAC only means something next to what a customer is worth. For a subscription business: LTV = monthly revenue per customer × gross margin ÷ monthly churn. A customer paying $50 a month at a 70% margin with 4% monthly churn is worth about 50 × 0.70 ÷ 0.04 = $875 in gross profit. With a CAC of $200, the LTV:CAC ratio is 4.4 : 1. The payback period – how long until gross profit covers the CAC – is 200 ÷ (50 × 0.70) = 5.7 months.

For ecommerce, estimate LTV from average order value × gross margin × expected orders per customer. A store with a $60 average order, 40% margin and 2.5 orders per customer has an LTV of about $60, so a CAC above $60 loses money unless repeat purchases increase.

What is a good LTV:CAC ratio?

A ratio around 3:1 is a widely quoted rule of thumb, especially in SaaS, along with payback in about 12 months or less. But 'good' depends on your margins, cash position and growth goals. A young business funding growth from revenue may need fast payback more than a high ratio.

How to lower CAC

• Improve conversion rates on landing pages and checkout – more customers from the same traffic lowers CAC directly.
• Raise ad click-through rates with better targeting and creative (see our CTR and CPM guides).
• Shift budget toward channels with the lowest channel CAC.
• Invest in organic search, content and referrals, which keep bringing customers without paying per click.
• Shorten the sales cycle and qualify leads earlier.
• Raise retention so LTV grows – this improves the ratio even if CAC stays the same.

Common CAC mistakes

• Mixing periods: counting this month's customers against last month's spend. For long sales cycles, offset costs by the typical lag.
• Counting returning customers as new.
• Leaving out salaries, making CAC look far lower than it is.
• Judging CAC without LTV or margin.

CAC by channel: an example

Here the blended CAC of about $111 hides a social channel that costs more than twice as much per customer as search. Shifting part of that budget, or improving the social ads' targeting and conversion rate, would lower the overall CAC. Attribution is never perfect – customers often touch several channels – so treat channel CAC as a guide and test changes gradually.

CAC for ecommerce stores

For online shops, compare CAC with the gross profit from a customer's first order and their expected repeat orders. If your average first order is $80 at a 45% margin ($36 gross profit) and CAC is $45, you lose $9 on the first purchase and need repeat orders to profit. Raising average order value (bundles, free-shipping thresholds) and encouraging repeat purchases (email, loyalty programmes) both improve the picture without cutting acquisition spend.

Related guides

• Customer Acquisition Cost (CAC): How to Calculate It and What It Tells You
• How to Set a Small Business Marketing Budget (With Worked Examples)
• CPM vs CPC vs CTR: Ad Metrics Explained With Formulas
• What Is a Good CTR? How to Calculate and Improve Click-Through Rate
• Markup vs Margin: What's the Difference and How Do You Convert Them?

Sources

1. U.S. Small Business Administration – Marketing and sales — sba.gov/business-guide/manage-your-business/marketing-sales