How to use the customer acquisition cost calculator
- 1Pick a period, such as last month or last quarter, and enter your total marketing spend for it.
- 2Enter your sales spend for the same period: sales salaries, commissions and sales tools. Leave it blank if you have none.
- 3Enter how many new customers you won in that period. Count first-time customers only, not repeat orders.
- 4Optionally enter how many of those customers came from paid ads, and the gross profit a customer brings in their first year.
- 5Read your blended CAC, paid CAC and payback period, and compare CAC with customer lifetime value.
What customer acquisition cost includes
Customer acquisition cost (CAC) is the average amount you spend to win one new customer. It is all your marketing and sales costs for a period divided by the new customers you gained in that period.
A full CAC includes more than ad spend: marketing and sales salaries (or the share of time spent on them), commissions, agencies and freelancers, software such as a CRM or email tool, content production and events. Leaving out salaries is the most common reason CAC looks better than it is. Whatever you include, use the same list every period so the numbers are comparable.
CAC = (Marketing spend + Sales spend) ÷ New customers
Blended CAC vs paid CAC
Blended CAC divides spend by every new customer, including those who found you through word of mouth, search or repeat referrals. It is useful for the business as a whole, but organic customers make it look low.
Paid CAC divides the same spend by only the customers who came from paid channels. It answers a harder question: if you want more customers than arrive on their own, what will each one cost? Some teams divide only paid ad spend by paid customers instead; either way, be clear which version you are reporting.
Paid CAC = (Marketing spend + Sales spend) ÷ Customers from paid channels
CAC payback and lifetime value
CAC on its own does not tell you whether it is too high. Compare it with what a customer earns you. The payback period is how many months of gross profit from a customer it takes to cover what it cost to win them. Shorter payback means cash comes back sooner to fund the next customer.
Over the long term, compare CAC with customer lifetime value (CLV). A common rule of thumb is a CLV:CAC ratio of about 3:1. Use the customer lifetime value calculator to work out CLV and that ratio.
Payback months = CAC ÷ (First-year gross profit per customer ÷ 12)
Worked example
An online business spends $18,000 on marketing and $12,000 on sales salaries and tools in a quarter, and wins 150 new customers. 90 of them came from paid ads. A customer brings in $480 of gross profit in their first year.
| Marketing spend | $18,000.00 |
| Sales spend | $12,000.00 |
| New customers | 150 |
| Blended CAC | $200.00 |
| Customers from paid channels | 90 |
| Paid CAC | $333.33 |
| Payback period (blended) | 5 months |
| Payback period (paid) | 8.3 months |
Each new customer costs $200 on average, or $333.33 when counting only customers won through paid ads. At $40 of gross profit a month, a paid customer pays back their cost in a little over 8 months.