CAC Calculator Customer Acquisition Cost

Common Questions

• What is customer acquisition cost?

  Customer acquisition cost, or CAC, is what you pay to win one new customer. Add up everything you spent getting customers over a period, then divide by how many you got. Spend $10,000 in a quarter and sign 40 new customers and your CAC is $250. It is the number that tells you whether growth is affordable. Revenue can climb while CAC climbs faster, and from the outside that looks like a good year right up until the bank balance says otherwise. Track it every quarter, not once.

• How do I calculate CAC?

  Divide your total sales and marketing spend by the number of new customers it produced in the same period: CAC = spend ÷ new customers. Spend $6,000 in a month and sign 24 customers and your CAC is $250. Use matching date ranges, and count only new customers — repeat business is not acquisition. If your sales cycle runs long, lag the customer count behind the spend by about the length of that cycle, or you will credit this month's deals to next month's budget.

• What's a good CAC?

  There is no universal number, because a $400 CAC is a disaster for a coffee shop and a bargain for a roofing company. The only comparison that means anything is against what a customer is worth to you. If your average customer spends $900 with you over the years, a $250 CAC leaves $650 to cover everything else. If they spend $200, that same $250 CAC means you pay to lose money. Work out your lifetime value first, then judge CAC against it with the ratio above.

• What's a good LTV to CAC ratio?

  3:1 is the common target — each customer returns three dollars of lifetime value for every dollar you spent winning them. The benchmark comes from SaaS investor David Skok's ForEntrepreneurs research, which is where most of the modern LTV:CAC guidance traces back to. Below 1:1 you lose money on every sale. Between 1:1 and 3:1 the business works but has little slack. Above 5:1 is usually not a trophy: it often means you could spend more on marketing and still come out well ahead, and a competitor eventually will.

• What counts as acquisition spend?

  Everything you spend to bring in new business. Ad budgets across every platform. Agency and freelancer fees. The share of salary for anyone whose job is marketing or sales. Software you use to do it — email tools, CRM, scheduling. Commissions on new deals. Print, signs, sponsorships, the booth at the trade show. What does not count: rent, accounting, and anything you would still pay if you stopped marketing tomorrow. Miss the salaries and you can understate CAC badly — count $4,000 of ads but not the $4,000 of someone's time running them and your real CAC is double what you think.

• How do I lower my CAC?

  Convert more of the traffic you already pay for. Going from a 2% conversion rate to 3% cuts CAC by a third with no change to your budget — usually a faster site, a clearer offer, and fewer form fields. Next, cut the channels that produce no customers rather than no clicks; look at the last 90 days by source. Then build the sources that cost nothing per customer: reviews, referrals, and search. And ask every new customer how they found you. Most owners are guessing, and the guess is usually wrong.