Customer Acquisition Cost (CAC) Calculator
What is customer acquisition cost?
Customer acquisition cost (CAC) is the total cost of acquiring a new customer. It includes everything you spend on marketing and sales to bring in a paying customer. For a deeper breakdown of CAC formulas, weighted averages by channel, and common calculation mistakes, read our full guide on how to calculate customer acquisition cost.
The formula: CAC = (Marketing Spend + Sales Spend) / New Customers Acquired
CAC is one of the core unit economics metrics for any business. It tells you whether your growth is sustainable. If you spend more to acquire a customer than that customer will ever generate in revenue, you lose money on every sale.
Most teams calculate CAC monthly or quarterly. The time period doesn’t matter as long as you’re consistent and the spend period matches the customer acquisition period.
Blended vs. paid CAC
There are two ways to look at CAC, and they answer different questions.
Blended CAC divides all marketing and sales spend by all new customers. This gives you the average cost across every channel, including organic search, word of mouth, and direct traffic. Blended CAC is the number most executives and investors want to see because it reflects your total cost of growth.
Paid CAC only counts spend on paid channels (ads, sponsorships, paid partnerships) divided by the customers those channels generated. Paid CAC is typically higher than blended CAC because it strips out the “free” customers from organic channels.
The gap between these two numbers tells you how much organic acquisition is subsidizing your paid efforts. A large gap means you’re relying heavily on organic channels. That’s good until organic traffic slows down.
How to lower your CAC
- Improve conversion rates. Getting more customers from the same spend is the fastest way to reduce CAC. Test landing pages, simplify sign-up flows, and remove friction from your sales process.
- Invest in organic channels. Content marketing, SEO, and community building have high upfront costs but generate customers at near-zero marginal cost over time.
- Tighten targeting. Narrower audience targeting in paid campaigns reduces wasted spend. Better qualification criteria in sales reduces time spent on deals that won’t close.
- Shorten your sales cycle. Every extra week in the pipeline increases CAC. Faster deals mean fewer touchpoints and less sales labor per customer.
- Reduce churn. This doesn’t lower CAC directly, but it improves CAC:LTV ratio. A customer who stays longer generates more value from the same acquisition cost.
CAC and lifetime value
CAC on its own is just a number. It only becomes useful when you compare it to how much revenue each customer generates over their lifetime (LTV).
The standard benchmark is a 1:3 CAC:LTV ratio. If your CAC is $500, each customer should generate at least $1,500 in lifetime revenue. Below 1:3, you’re spending too much to acquire customers relative to their value. Above 1:3, you may have room to invest more in growth.
Some businesses operate profitably at 1:2 if they have low operating costs. Others need 1:5 or better because their margins are thin. The right ratio depends on your business model.
Frequently Asked Questions
How do you calculate customer acquisition cost?
Divide your total sales and marketing spend by the number of new customers acquired. For example, if you spent $50,000 and acquired 100 customers, your CAC is $500.
What is the difference between blended and paid CAC?
Blended CAC includes all marketing and sales spend divided by all new customers. Paid CAC only counts paid channel spend divided by customers from paid channels. Blended CAC is typically lower because it includes organic customers that cost nothing to acquire.
What is a good CAC?
It depends on your industry and business model. CAC is most useful when compared to customer lifetime value (LTV). A common benchmark is a CAC:LTV ratio of 1:3, meaning each customer should generate at least 3x what you spent to acquire them.