Customer Acquisition Cost (CAC) Calculator
Use this calculator to determine your average Customer Acquisition Cost (CAC) over a specific period. CAC is a key metric representing the cost of winning a customer to purchase a product or service.
Enter the **Total Sales & Marketing Costs** spent and the **Number of New Customers Acquired** during the same defined period.
Enter Data for the Period
Understanding Customer Acquisition Cost (CAC)
What is CAC?
Customer Acquisition Cost (CAC) is a metric used in marketing and sales to measure the total average cost a company spends to acquire a new customer. It's calculated by dividing total sales and marketing expenses over a specific period by the number of new customers acquired in that same period.
CAC Formula
The basic formula for CAC is straightforward:
CAC = (Total Sales & Marketing Costs) / (Number of New Customers Acquired)
Understanding your CAC helps you evaluate the efficiency of your marketing and sales efforts, determine profitability per customer, and make informed decisions about scaling your business.
What Costs to Include?
When calculating total sales and marketing costs, include all expenses related to acquiring new customers. This can vary by business but commonly includes:
- Advertising Spend (online ads, print, TV, etc.)
- Salaries for Sales and Marketing Personnel
- Marketing Software Costs (CRM, analytics, automation)
- Creative Costs (design, copywriting)
- Commissions Paid to Salespeople
- Overhead Related to Sales and Marketing
Ensure you only include costs and customers from the *same* defined period (e.g., a month, a quarter, a year).
Why is CAC Important?
- Profitability: Compare CAC to Customer Lifetime Value (CLTV) to understand if acquiring customers is profitable (ideally, CLTV > CAC).
- Scaling: Helps determine how efficiently you can grow and how much budget is needed to acquire more customers.
- Optimization: Identifies which channels or campaigns are most cost-effective for acquiring customers.
- Decision Making: Informs pricing strategy, budget allocation, and investment decisions.
CAC Calculation Examples
Click on an example to see the step-by-step calculation:
Example 1: Small Online Store (Monthly)
Scenario: An online store spent $5,000 on ads and marketing tools in a month and acquired 100 new customers.
1. Known Values: Total Costs = $5,000, New Customers = 100.
2. Formula: CAC = Total Costs / New Customers
3. Calculation: CAC = $5,000 / 100
4. Result: CAC = $50.
Conclusion: It cost the store an average of $50 to acquire one new customer that month.
Example 2: Software Company (Quarterly)
Scenario: A SaaS company's sales and marketing costs for a quarter were $75,000. They gained 25 new paying subscribers in that quarter.
1. Known Values: Total Costs = $75,000, New Customers = 25.
2. Formula: CAC = Total Costs / New Customers
3. Calculation: CAC = $75,000 / 25
4. Result: CAC = $3,000.
Conclusion: The average cost to acquire a new subscriber for the quarter was $3,000.
Example 3: Local Restaurant (Annual)
Scenario: A restaurant spent $12,000 on local advertising and promotions in a year. They estimate this brought in 400 new regular customers.
1. Known Values: Total Costs = $12,000, New Customers = 400.
2. Formula: CAC = Total Costs / New Customers
3. Calculation: CAC = $12,000 / 400
4. Result: CAC = $30.
Conclusion: The estimated cost to acquire a new regular customer was $30 that year.
Example 4: Mobile App (Monthly)
Scenario: A mobile app spent $20,000 on app store ads and influencer marketing in a month, resulting in 2,500 new users who made their first purchase.
1. Known Values: Total Costs = $20,000, New Customers = 2,500.
2. Formula: CAC = Total Costs / New Customers
3. Calculation: CAC = $20,000 / 2,500
4. Result: CAC = $8.
Conclusion: The app's cost per new paying customer was $8 for the month.
Example 5: B2B Service (Annual)
Scenario: A B2B service company's sales & marketing department had annual costs of $500,000 (salaries, travel, events, etc.) and closed 50 new client contracts.
1. Known Values: Total Costs = $500,000, New Customers = 50.
2. Formula: CAC = Total Costs / New Customers
3. Calculation: CAC = $500,000 / 50
4. Result: CAC = $10,000.
Conclusion: Acquiring a new B2B client cost the company $10,000 on average that year.
Example 6: E-learning Platform (Monthly)
Scenario: An e-learning platform spent $8,000 on digital ads in a month and acquired 320 new students.
1. Known Values: Total Costs = $8,000, New Customers = 320.
2. Formula: CAC = Total Costs / New Customers
3. Calculation: CAC = $8,000 / 320
4. Result: CAC = $25.
Conclusion: The cost to acquire a new student was $25 for the month.
Example 7: Subscription Box (Quarterly)
Scenario: A subscription box service had quarterly marketing expenses of $15,000 and gained 600 new subscribers.
1. Known Values: Total Costs = $15,000, New Customers = 600.
2. Formula: CAC = Total Costs / New Customers
3. Calculation: CAC = $15,000 / 600
4. Result: CAC = $25.
Conclusion: The average cost to acquire a new subscriber was $25 for that quarter.
Example 8: Physical Retail Store (Annual)
Scenario: A new retail store spent $25,000 on grand opening promotions, local flyers, and signage in its first year, attracting 1000 new customers who made a purchase.
1. Known Values: Total Costs = $25,000, New Customers = 1000.
2. Formula: CAC = Total Costs / New Customers
3. Calculation: CAC = $25,000 / 1000
4. Result: CAC = $25.
Conclusion: The cost per new customer was $25 in the first year.
Example 9: Consultancy Service (Monthly)
Scenario: A consultancy service's monthly marketing efforts (content marketing, networking) cost $3,000 and resulted in 5 new clients.
1. Known Values: Total Costs = $3,000, New Customers = 5.
2. Formula: CAC = Total Costs / New Customers
3. Calculation: CAC = $3,000 / 5
4. Result: CAC = $600.
Conclusion: Acquiring a new client cost the consultancy $600 that month.
Example 10: Low-Cost Product (Monthly)
Scenario: A company selling a low-cost digital product spent $1,000 on social media ads in a month and gained 500 new paying customers.
1. Known Values: Total Costs = $1,000, New Customers = 500.
2. Formula: CAC = Total Costs / New Customers
3. Calculation: CAC = $1,000 / 500
4. Result: CAC = $2.
Conclusion: The CAC for the low-cost product was $2 for the month.
Understanding Cost Measurement
Ensure your total costs and customer count cover the exact same time period for an accurate CAC calculation. Use a consistent currency unit for costs.
Frequently Asked Questions about CAC
1. What does CAC stand for?
CAC stands for Customer Acquisition Cost.
2. Why is CAC important for a business?
CAC helps businesses understand how much they are spending to gain each new customer, which is crucial for evaluating profitability (especially when compared to Customer Lifetime Value), optimizing marketing spend, and planning for growth.
3. What costs should be included in the calculation?
Include all costs related to marketing and sales efforts aimed at acquiring *new* customers during the defined period. This can include advertising, salaries, software, creative costs, commissions, and related overhead.
4. What is considered a "good" CAC?
There's no universal "good" CAC; it varies greatly by industry, business model, and average customer value. A good CAC is one that is significantly lower than your Customer Lifetime Value (CLTV). A common benchmark is a CLTV:CAC ratio of 3:1 or higher.
5. How often should I calculate my CAC?
Regular calculation (e.g., monthly or quarterly) is recommended to track performance over time, identify trends, and measure the impact of marketing changes.
6. Can CAC be negative?
No, CAC cannot be negative as costs and the number of acquired customers are always non-negative. If the number of new customers is zero, the CAC calculation is undefined or effectively infinite (indicating no customers were acquired despite spending).
7. What if I acquired zero new customers in the period?
If you spent money but acquired zero new customers, the calculator cannot compute a meaningful CAC (division by zero). This indicates an unsuccessful acquisition effort during that period.
8. How can I reduce my CAC?
Reducing CAC can involve optimizing conversion rates, improving sales efficiency, investing in cheaper or more effective marketing channels, leveraging customer referrals, or improving product-market fit to make acquisition easier.
9. Does CAC include the cost of retaining existing customers?
No, CAC specifically focuses on the cost of acquiring *new* customers. Costs related to keeping existing customers happy and engaged fall under customer retention or customer success costs, which are separate metrics.
10. What is the difference between CAC and CPA?
CAC (Customer Acquisition Cost) measures the total cost to acquire a *paying customer* over a specific period, considering all sales and marketing expenses. CPA (Cost Per Acquisition or Cost Per Action) is a broader digital marketing metric that measures the cost of a specific desired action (like a lead, a click, a download, or sometimes a sale) often tied to a single campaign or channel, not necessarily the final cost of a *new paying customer* across all efforts.
