Customer Acquisition Cost (CAC) Calculator

Track your marketing efficiency and calculate your customer acquisition cost (CAC) with just a few clicks.
We also break down the meaning of the key metrics like CAC, LTV, and LTV-CAC ratio below.

Inputs

Units
Current period

Paid and ongoing marketing expenses

Marketing campaign expenses
$

Consider sales, marketing team (incl. CMO) base salaries, social contributions, taxes, commission, etc.

S&M team payroll
and comissions
$

Consider marketing services and relevant software (CRM) subscription fees, travelling expenses (if applicable for sales), etc.

Other marketing-
related expenses
$
New customers
acquired
#

Outputs

The cost a company incurs to acquire a new customer, including marketing and sales expenses.

Customer Acquisition Cost (CAC)
$

Why use a CAC calculator?

The success of a product is directly linked to revenue, which, in turn, depends on Customer Acquisition Costs (CAC). The money spent on acquiring customers (CAC) plays a crucial role in determining how much revenue you’ll be able to earn.

The  customer acquisition cost calculator helps you understand exactly that, allowing you to:

  • Manage costs
  • Plan finances
  • Guide budget decisions
  • Optimize marketing channels
  • Evaluate marketing campaign effectiveness
  • Make strategic growth decisions
  • Benchmark competitiveness
  • Enhance investor confidence
  • Analyze the profitability of customer segments and products or services.

Note: High conversion but low profitability? It may be time to refine your marketing funnel for optimal ROI. Optimize your website, clarify product messaging, and implement targeted upselling strategies. Refine advertising channels based on performance data for cost-effective results.

What is Customer Acquisition Cost (CAC)?

Customer acquisition cost (CAC) is the total cost of attracting a customer. Think of it as the price you pay to get someone into your business’s door. CAC is an important metric to calculate over defined periods such as a week, a month, or the length of an advertising campaign. It helps businesses determine their customer acquisition efforts’ return on investment (ROI).

CAC includes a company’s spending on the following:

  • Digital marketing (ads, social media, content)
  • Billboards & broadcast advertising
  • Telemarketing
  • Social media campaigns
  • Personnel & Development
  • Marketing team salaries & commissions
  • Ad design & development costs
  • Referral program costs
  • Website optimization expenses
  • Event participation

Formula to calculate CAC

  1. Pick Your Timeframe: Month, quarter, year? Choose your analysis period.
  2. Expense Roundup: Ads, social media, content, salaries, events — add all marketing & sales expenses for that period.
  3. New Customer Count: How many new faces did you see during the same timeframe?
  4. CAC Revealed: Divide expenses (step 2) by new customers (step 3) to unlock your CAC.

*This is a simplified guide; CAC approaches can vary depending on your business model and industry.

cost of acquisition formula

What is a good customer acquisition cost?

While there’s no universally perfect LTV: CAC ratio, the agreed-upon sweet spot is at least 3:1. Ideally, you spend about 33% of your average LV on new customer acquisition. Ultimately, a healthy LTV: CAC ratio highly depends on your specific business model, industry trends, and customer acquisition strategy.

Note: Don’t stick to a single ideal ratio. Instead, take a contextual approach, prioritize long-term customer value, and leverage continuous optimization through strategic acquisition and retention efforts.

What is the CAC payback period?

The CAC payback period is the time it takes for a company to recover its cost of acquiring a new customer. Factors like marketing spending, service prices, and what customers pay influence it. For example, more straightforward methods like social media may have lower payback periods, while more involved campaigns with mailers and billboards may take longer.

This formula can help calculate the CAC payback period

What is the customer lifetime value (LTV)?

LTV or CLV stands for Customer Lifetime Value and is a measure of a customer’s overall value throughout their relationship with your company.

This goes beyond a single sale and captures the cumulative revenue expected over the customer’s lifetime.

LTV formula

How are customer acquisition costs (CAC) and customer lifetime value (LTV) connected?

While CAC reflects the cost of acquiring a new customer, LTV indicates the total revenue but gross profit per 1 new customer. Companies often combine CAC and LTV data to determine their LTV to-CAC ratio to better understand operating costs and profit potential. You can also see the connection by:

  • Identifying a healthy LTV: CAC ratio: Usually, it is 3:1, showing that customer revenue significantly surpasses your acquisition costs. 
  • Prioritizing your acquisition strategy: Higher LTV gives you more flexibility in designing your CAC. You may be able to justify higher acquisition costs for higher-quality customers if they add significant value over the long term.
  • Optimizing Marketing Tactics: Analyzing LTV across different customer segments and marketing channels can help you determine the most efficient way to acquire high-value customers. You can then prioritize and invest in channels offering lower CAC and higher LTV
  • Implications for pricing: Knowing  LTV allows you to price strategically. Products serving high-value segments with higher LTV can be priced higher, potentially allowing for even higher CAC in these specific cases. 
  • Accelerating Customer Retention Efforts: An increased focus on customer retention directly impacts LTV. Implement loyalty programs, upsell strategies, and improve customer service to extend customer longevity, increase overall value, and positively impact your LTV: CAC ratio.

Note: If the money you earn from a customer over their lifetime exceeds what you spent to acquire them (LTV is higher than CAC), your business is profitable, which is positive.

What is the LTV/CAC ratio and how to calculate it?

The LTV to CAC ratio or LTV: CAC indicates efficient spending versus earning from customers, guiding strategic decisions in acquisition and retention, optimizing marketing efforts, and influencing pricing strategies for maximum profitability.

LTV:CAC formula

Note: Ensure your LTV is three times higher than your CAC to maintain a healthy balance and avoid overspending on marketing. Review historical trends and competitor data for context; avoid immediate cuts to marketing spending if your ratio is below 3:1 during solid growth.

FAQ

What is the average customer acquisition cost?

Average CAC varies by industry. Calculate yours using total marketing/sales costs divided by the number of new customers. Or equip yourself with our CAC calculator above.

How to lower customer acquisition costs?

To reduce CAC, focus on strategies that enhance customer LTV, like improving retention and personalizing customer experiences.

How to calculate customer acquisition costs for a new website?

You can calculate with a simple CAC formula for new websites: totaling design, development, and marketing costs against new visitors or customers.

What is a good customer acquisition cost for SaaS?

While there’s no universally perfect LTV: CAC ratio, the agreed-upon sweet spot is at least 3:1. In SaaS CAC, every $1 spent on acquiring customers (CAC) generates $3 in total customer value (LTV). You can achieve this by refining acquisition strategies, reducing CAC, and boosting customer retention and upselling.

Can customer acquisition cost be negative?

No, the customer acquisition cost cannot be negative, as this would imply earning from customer acquisition, which is not feasible.

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