Divide what you spend winning customers by how many you win. Add profit per customer or lifetime value to see payback and the LTV to CAC ratio.
Results are estimates for planning. Check the figures before you make a financial or health decision.
How to calculate CAC
Divide your total sales and marketing spend by the number of new customers in the same period:
CAC = sales and marketing spend รท new customers
Include everything that goes into winning customers: advertising, salaries, commissions, tools and agency fees. If you spent 20,000 and won 125 customers, your CAC is 160.
Worked example
Using the default values in the calculator above:
| Input | Value |
|---|---|
| Sales and marketing spend | 20,000 |
| New customers won | 125 |
| Gross profit per customer per year, optional | 350 |
| Customer lifetime value, optional | 900 |
| Result | Value |
|---|---|
| Customer acquisition cost | 160 |
| New customers per 1,000 spent | 6.25 |
| CAC payback | 5.5 months |
| LTV to CAC ratio | 5.63 : 1 |
| Lifetime profit after CAC | 740 |
What is a good CAC?
A good CAC is one that is comfortably lower than the lifetime profit a customer brings. That is why CAC is usually judged through the LTV to CAC ratio and the payback period. A common target is a ratio of at least 3 to 1 and payback within a year, although the right figures depend on your business model and cash position.
Tips and common mistakes
Count all costs. Using only ad spend gives a figure that is too low and makes growth look cheaper than it is.
Use the same period for spend and customers. If sales take months to close, match spend to the customers it eventually produced.
Separate paid and organic customers if you can. A blended CAC can hide an expensive paid channel.
Frequently asked questions
What is the difference between CAC and CPA?
CPA is the cost per conversion in a campaign. CAC is the total cost of winning a paying customer, including sales effort.
How do I reduce CAC?
Improve conversion rates, target better audiences, grow referrals and organic channels, and shorten the sales process.
What is a good payback period?
Many businesses aim to recover CAC within 12 months or less, but it depends on margins, cash flow and how long customers stay.
Should I include overheads?
Include costs directly tied to acquiring customers. General overheads are usually left out, but be consistent.