What Is Customer Acquisition Cost?
Customer acquisition cost (CAC) measures how much it costs your business to acquire one new paying customer. It combines every dollar spent on sales and marketing and divides it by the number of new customers those dollars produced.
CAC is not just a marketing metric — it is a business health metric. If your CAC exceeds your customer lifetime value (CLV), you are paying more to acquire customers than they are worth.
The CAC Formula
CAC = Total Sales & Marketing Spend ÷ Number of New Customers Acquired
Both figures should cover the same time period — typically a month, quarter, or year. Use new customers only, not total customers.
Step-by-Step: How to Calculate CAC
Step 1 — Add up your total sales and marketing spend. This includes:
- Ad spend (Google Ads, Meta, LinkedIn, etc.)
- Salaries and contractor fees for sales and marketing staff
- Software and tools (CRM, email platform, SEO tools)
- Agency fees and creative costs
- Content production costs
Step 2 — Count only new customers acquired in the same period. Do not include renewals or upsells.
Step 3 — Divide. Spent $36,000 and acquired 200 new customers: CAC = $36,000 ÷ 200 = $180.
3 Worked Examples
Example 1: SaaS Company
Monthly spend: $45,000. New customers: 250.
CAC = $180. With $35/month × 24 months CLV = $840. LTV:CAC = 4.7:1. Strong.
Example 2: eCommerce Store
Monthly spend: $9,000. New customers: 200.
CAC = $45. With $85 AOV × 2.5/year × 2 years, CLV = $425. LTV:CAC = 9.4:1. Excellent.
Example 3: B2B Professional Services
Quarterly spend: $96,000. New clients: 30.
CAC = $3,200. With $15,000 ACV × 3-year lifespan, CLV = $45,000. LTV:CAC = 14:1.
CAC Benchmarks by Industry
| Industry | Typical CAC Range |
|---|---|
| SaaS / Software | $200 – $700 |
| eCommerce | $30 – $80 |
| B2B Professional Services | $500 – $3,000+ |
| Healthcare | $300 – $600 |
| Financial Services | $500 – $1,200 |
| Real Estate | $1,000 – $5,000 |
Common Mistakes When Calculating CAC
- Not including salaries. Staff costs can make up 50%+ of true CAC.
- Using total customers instead of new customers. Inflates the denominator.
- Blending channels. Calculate CAC by channel to find what to cut and what to scale.
- Too-short time periods. Longer sales cycles need longer measurement windows.
What Is a Good CAC? The LTV:CAC Ratio
- Below 1:1 — losing money on every customer.
- 1:1 to 3:1 — marginally viable.
- 3:1 to 5:1 — healthy. The widely cited benchmark.
- Above 5:1 — very profitable; consider increasing spend to acquire more.
See CAC vs LTV for Startups for the full ratio framework.
Related Calculators
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