Customer Acquisition Cost (CAC) Calculator

Customer acquisition cost (CAC) is a metric that shows how much it costs to acquire a new customer on average. It combines marketing and sales expenses into one easy-to-understand number.

This calculator will calculate your CAC based on total spend and new customers acquired. It then compares this cost to the Customer Lifetime Value (CLTV) and calculates how long it takes for a single customer acquisition to pay off through resulting profits.

What is the customer acquisition cost?

CAC is the sum of all costs associated with acquiring, converting and closing a sale divided by the number of new customers acquired during that time period. It's a central metric for any company investing in growth.

The value of the CAC alone is just a price. It becomes meaningful only when it's compared to customer value. So, the ratio of CLTV to CAC is more important than the isolated CAC number.

Formula to calculate CAC:

You take the marketing and sales costs for a given period of time, add any additional customer acquisition costs, then divide that by the number of customers acquired.

Let's say a company spends $45,000 on marketing and $15,000 on sales in a given month, resulting in 250 new customers.

The customer acquisition cost (CAC) is the amount ($45,000 + $15,000), divided by the number of customers acquired (250), which results in $240 per customer.

The table below lists each input parameter and its corresponding value for this example.

Costs to consider.

If you calculate your Customer Acquisition Cost (CAC) using only advertising costs, it will often appear lower than it actually is. To get a reliable figure, all the costs associated with acquiring a customer must be taken into account.

• Paid advertising and paid social media ads.

• Costs for agencies, influencers, affiliate marketing and public relations.

• Subscription fees for marketing and sales software.

• Costs for creating content, creative works and designs.

• The salary and commission of sales staff.

• A reasonable percentage of administrative costs associated with customer acquisition.

Please do not consider costs that are incurred to retain existing customers such as customer support or loyalty programs. These are part of customer retention and not acquisition.

How to use this calculator:

Input your marketing and sales costs, as well as the number of new customers you acquired to determine your customer acquisition cost (CAC). Add any additional customer acquisition costs if applicable.

You can run the calculations in either direction. Leave one of the four fields blank and enter values for the other three fields and the tool will calculate the missing value. If you leave the "New Customers" field blank, you can determine how many customers you can acquire with your budget at a given target CAC.

If you turn on the Customer Lifetime Value tier, you'll see the ratio of LTV to CAC and profit per customer after acquisition. If you turn on the Payback Period tier, you'll see how many months of profit it takes to recoup those costs.

The ratio of LTV to CAC.

Customer Lifetime Value (CLTV) is the expected total gross profit that a customer will generate over their relationship with your business. By dividing CLTV by Customer Acquisition Cost (CAC), you get a value which indicates how many times the value of a customer exceeds the cost to acquire them.

A commonly used guideline is about 3 to 1. The table below shows how to interpret the current values.

CAC payback period

The payback period is the time it takes for a customer to generate enough profit to cover the cost of acquiring them. It's calculated by dividing the CAC by the monthly profit per customer.

If the CAC is $240 and each customer generates $80 profit per month, then the payback period would be three months. Many subscription businesses strive to recoup their CAC within twelve months in order to avoid tying up capital for too long.

CAC benchmarks by business model.

There is no ideal CAC that fits all situations. The value a customer generates depends on the business model. In enterprise software, a $500 CAC can be reasonable while it would be disastrous for retail businesses with low profit margins. Treat these figures as guidelines and not hard targets.

How to lower your CAC.

Lowering your customer acquisition cost (CAC) is not simply about reducing spend; it's usually more about getting more customers with the same amount of spend.

• Optimize your overall funnel conversion rate and reduce unnecessary leads.

• Distribute your budget to the channels with the lowest cost per customer.

• Create a referral and word-of-mouth cycle to attract low-spending customers.

• Invest in organic channels like SEO and content creation that will have an exponential effect over time.

• It increases customer retention rate and customer lifetime value which makes the existing customer acquisition costs (CAC) more justifiable.

• Negotiate with agencies, platforms and suppliers to get better rates.

CAC and CPA

Cost per acquisition (CPA) generally refers to the advertising cost behind a single conversion within an ad campaign. CAC is a broader term that includes all marketing and sales costs including salaries, software, and overheads, and refers to all new customers.

When evaluating advertising campaigns, we use the cost-per-acquisition (CPA), while using customer acquisition cost (CAC) to evaluate overall company health.