Customer Acquisition Cost (CAC) Calculator
See what it costs you to win each new customer, whether that cost pays off over the customer's lifetime, and how many customers your budget can buy.
Ads, sales and marketing pay, tools and agencies this month.
In the same period. Count new customers only.
Search, social, video, display, sponsorships.
CRM, email, analytics, ad tools.
Salaries, commission and employer costs.
Leave out time spent on existing customers. Blank = 100%.
Events, content, sign-up offers, gifts.
Part of the total above.
The rest count as organic: referrals, search, word of mouth.
Gross profit a customer brings over their whole time with you. Work it out.
Customers who leave ÷ customers at the start.
What's left of each sale after the cost of the product or service. Blank = 100%.
3:1 is a commonly quoted benchmark, not a standard.
Shows the most CAC that pays back in this time.
How many customers this buys at your CAC.
Shows the budget you'd need.
CAC by channel
Up to 6 channels: what each cost and the customers it brought in, in the same period.
How your customer acquisition cost is worked out
CAC = what you spent winning customers ÷ the new customers you won in the same period.
- 1
Add up the spend
Total spend= $30,000
- 2
Divide by customers
$30,000 ÷ 100= $300 each
- 3
LTV:CAC ratio
$1,000 ÷ $300= 3.33 : 1
- 4
Most to pay (3:1)
$1,000 ÷ 3= $333.33
Read more: the formula, a worked example, blended vs paid CAC, LTV:CAC and payback
Customer acquisition cost (CAC) is what you spend, on average, to win one new customer. On its own it only tells you the price of growth. Compare it with what a customer is worth over their lifetime (LTV) and how quickly their profit pays it back, and you can see whether your marketing pays for itself.
The formula
CAC = sales and marketing spend in a period ÷ new customers won in that period
spend = ad spend + sales and marketing pay × share of time on new customers + tools + agencies + other
paid CAC = paid-ad spend ÷ customers from paid ads
LTV:CAC = lifetime value ÷ CAC
LTV (worked out) = revenue per customer a month × gross margin ÷ monthly churn
CAC payback (months) = CAC ÷ (revenue per customer a month × gross margin)
target CAC = LTV ÷ target LTV:CAC
customers a budget buys = budget ÷ CAC
Worked example
You spend $30,000 on sales and marketing in a month and win 100 new customers. CAC = $30,000 ÷ 100 = $300 a customer. If each customer is worth $1,000 of gross profit over their lifetime, LTV:CAC = $1,000 ÷ $300 = 3.33 : 1, just above the commonly quoted 3:1 benchmark, and each customer leaves $1,000 − $300 = $700 after the cost of winning them. To keep to 3:1 you could pay up to $1,000 ÷ 3 = $333.33 a customer.
Worked example: Advanced
Broken down, the $30,000 is $15,000 of ads + $20,000 of sales and marketing pay × 50% of their time on new customers ($10,000) + $2,000 of tools + $2,500 of agencies + $500 of other = $30,000. Of the 100 customers, 40 came from paid ads, so paid CAC = $15,000 ÷ 40 = $375, and the other 60 (60%) came in organically. Each customer pays $50 a month at an 80% margin, so they bring $50 × 80% = $40 a month and the $300 CAC pays back in $300 ÷ $40 = 7.5 months. With 4% monthly churn, LTV = $40 ÷ 0.04 = $1,000, the same as above, and because some customers leave early the average customer reaches $300 of profit in about 8.7 months. A $50,000 budget buys $50,000 ÷ $300 = 166.7, so 166 customers at today's CAC, or $50,000 ÷ $333.33 = 150 at the 3:1 target.
By channel: search ads cost $6,000 for 24 customers ($250 each, LTV:CAC 4 : 1), social ads $5,000 for 10 ($500, 2 : 1) and video ads $4,000 for 6 ($666.67, 1.5 : 1). Together that is $15,000 ÷ 40 = $375, the paid CAC. Search brings 60% of paid customers for 40% of the spend.
Blended vs paid CAC
| Measure | Spend counted | Customers counted |
|---|---|---|
| Blended CAC | All sales and marketing | All new customers |
| Paid CAC | Paid ads only | Customers from paid ads |
| Channel CAC | One channel | Customers from that channel |
Blended CAC looks better when many customers come from referrals or search. Paid CAC is the better guide when you decide whether to spend more on ads, because each extra customer from ads costs about that much.
LTV:CAC, a rule of thumb
| LTV:CAC | What it usually means |
|---|---|
| Below 1 : 1 | You lose money on every customer you win. |
| 1 : 1 to 3 : 1 | Customers pay back, but may not leave enough for overheads and profit. |
| 3 : 1 to 5 : 1 | The commonly quoted target. |
| Above 5 : 1 | Very profitable customers; you may be able to spend more to grow. |
About 3:1 is a widely quoted benchmark, not a standard or a law. A business short of cash may care more about a short payback; one with cheap funding may accept a lower ratio to grow faster.
Things to watch
- Use the same period for spend and customers. If customers take months to decide, spend from an earlier month may have won this month's customers.
- Count only new customers, not people who came back or upgraded.
- Use gross profit, not revenue, for LTV when you compare it with CAC.
- Free sign-ups are not customers: count people who paid.
These are averages: real customers and channels vary, and churn is assumed to stay the same each month. Use your own numbers from the last few months and recheck as your business changes.
Common questions
How do you calculate customer acquisition cost?
Add up everything you spent on sales and marketing in a period, then divide by the number of new customers you won in that same period. If you spent $30,000 in a month and won 100 new customers, your CAC is $30,000 ÷ 100 = $300 a customer.
What costs go into CAC?
Ad spend, the pay of your sales and marketing staff (or the share of their time spent winning new customers), sales and marketing software, agencies and freelancers, and other costs such as events, content and sign-up offers. Leave out the cost of serving customers you already have, such as support and account management.
What is the difference between blended and paid CAC?
Blended CAC divides all your sales and marketing spend by all new customers, including the ones who found you on their own. Paid CAC divides only your paid-ad spend by the customers who came from paid ads. Paid CAC is usually higher, and it tells you what each extra customer from ads really costs.
What is a good LTV:CAC ratio?
About 3:1 is a commonly quoted benchmark: a customer brings in roughly three times, in gross profit, what it cost to win them. It is a rule of thumb, not a standard. Below 1:1 you lose money on each new customer; far above 5:1 can mean you could spend more to grow faster.
How do you work out CAC payback?
Divide CAC by the gross profit a customer brings each month: CAC ÷ (monthly revenue per customer × gross margin). A $300 CAC with $50 a month at an 80% margin pays back in $300 ÷ $40 = 7.5 months. Because some customers leave early, the average customer takes a little longer.
How can I lower my CAC?
Move budget to the channels with the lowest CAC, improve your conversion rate so the same traffic brings more customers, grow referrals and organic search, and cut tools or agency costs that do not bring in customers. The channel table in Advanced shows which channels are cheapest.
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