Free tool
CAC Calculator
Customer acquisition cost is everything you spent to win customers, divided by the customers you won. Sales spend included, because leaving it out is how the number flatters you.
Your numbers
Everything you paid to reach people in the period: ad spend, agency fees, creator fees, tools.
Salaries, commission and sales tooling. Leaving this out is the commonest way a CAC comes back looking better than it is.
Your customer acquisition cost
3:1 is the usual bar
CAC
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LTV to CAC
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The formula
CAC = (marketing spend + sales spend) / new customers
Shares the numbers you entered, not your data. Everything is in the link itself.
What is CAC?
Customer acquisition cost is the total cost of winning one new customer: marketing and sales spend for a period, divided by the new customers that period produced.
The word doing the work is total. Ad spend is the part everyone counts. Agency retainers, creator fees, the tools, and the salaries and commission of anyone whose job is winning customers all belong in the numerator, and leaving them out is the commonest way a CAC comes back looking healthy while the business does not.
CAC = (marketing spend + sales spend) / new customers
A worked example
A brand spends $12,000 on marketing and $8,000 on sales in a quarter, and wins 250 new customers whose lifetime value is $320.
CAC = ($12,000 + $8,000) / 250 = $80.00
LTV to CAC = $320 / $80.00 = 4.0:1
The ratio is the point
CAC alone tells you almost nothing. An $80 acquisition cost is a bargain if a customer is worth $320 and a slow disaster if they are worth $120.
The category has settled on 3:1 as the usual bar: a customer should return at least three times what they cost to win, leaving room for the cost of serving them and for profit. Treat that as a convention rather than a law, because it came from software businesses with high gross margins, and a brand at a 35% margin needs more headroom than one at 80%.
Work out the lifetime value side with the CLV calculator, and the per-campaign version of the same question with the CPA calculator.
Getting the number right
Only new customers in the denominator
Returning buyers were acquired already. Counting them is the single most common way a CAC comes back wrong, and it always comes back wrong in the flattering direction.
Match the period on both sides
Spend in a quarter against customers won in that quarter. If your sales cycle is long, lag the customer count to match, and say so.
Blended and paid CAC answer different questions
Blended CAC divides all spend by all new customers, including the ones who came from word of mouth. Paid CAC isolates the channel. Both are useful and mixing them is not.
Track it as a trend
A single CAC is a snapshot of one quarter's auction and one quarter's creative. The direction over four quarters is the number that means something.
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Frequently Asked Questions
What is customer acquisition cost?
CAC is the total cost of winning one new customer: marketing spend plus sales spend for a period, divided by the new customers acquired in it. $12,000 of marketing and $8,000 of sales producing 250 customers gives a CAC of $80.00.
How do I calculate CAC?
Add all marketing and sales costs for the period, then divide by the number of NEW customers won. Include ad spend, agency and creator fees, tooling, and the salaries and commission of anyone whose job is acquisition. Enter the figures above and the calculator also returns your LTV to CAC ratio.
What is a good LTV to CAC ratio?
Three to one is the convention: a customer returns at least three times what they cost to win. Below that there is rarely enough left to cover serving them and still profit. Treat it as a rule of thumb rather than a target, because it originated with high-margin software businesses and a brand on thinner margins needs more room.
What is the difference between CAC and CPA?
CAC measures the cost of winning a customer across the whole business, including sales costs. CPA usually measures the cost of one conversion inside a campaign, counting media spend. A signup can have a CPA; only a paying customer has a CAC.
Should I include salaries in CAC?
Yes, for anyone whose job is winning customers: the sales team, the performance marketer, the agency. Excluding them produces a media-efficiency number rather than an acquisition cost, and the gap between the two is where unprofitable growth hides.
Do I need an account?
No account, no email, no credit card. Nothing you type is sent anywhere: the arithmetic runs in your browser.
Acquisition cost is decided upstream of the ad account
Bidding cannot rescue a message that does not land. Selzee reads your reviews, comments and campaign results, works out which arguments actually win customers, and briefs the creative from those rather than from a guess.
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