What is CAC (customer acquisition cost)

Formula

CAC = (marketing spend + sales spend) ÷ new customers in the period

Include paid media, tools, agency fees, and the salaries and commissions of the marketing and sales teams. Costs and customers must come from the same period, or the math mixes one month's spend with another month's customers.

Hypothetical example

In March, a language school spent $12,000 on ads, $3,000 on tools and agency fees, and $9,000 on the sales team's salaries and commissions. Total spend was $24,000.

In the same month, the school signed up 60 new students. CAC was $24,000 ÷ 60 = $400 per student.

Counting only the ads, the result would be $12,000 ÷ 60 = $200. That is paid CAC: useful for comparing campaigns, but only half of the real cost of bringing in each student.

What goes into CAC

Fully loaded CAC includes everything the company spends to turn a stranger into a customer. Leaving costs out makes the number look good and the decision wrong.

• Paid media: Google Ads, Meta Ads, LinkedIn Ads and any other advertising.
• Marketing and sales tools: CRM, email automation, landing page platforms.
• Agencies and freelancers working on acquisition.
• Salaries, payroll taxes and commissions of the marketing and sales teams.
• Content and materials produced to attract and convert.

Paid CAC and fully loaded CAC

In practice, companies track two versions. Paid CAC divides only the ad spend by the customers those ads brought in. It is the number a media buyer uses to compare campaigns and channels day to day.

Fully loaded CAC adds every acquisition cost and divides by all new customers. It is the number that tells you whether the business stands on its own. Both are useful, as long as nobody compares one with the other as if they measured the same thing.

CAC, CPA and CPL: what is the difference

All three measure cost, but at different points on the way to a sale:

CAC vs CPA vs CPL

	Divides cost by	What it is for
CPL	Leads (contacts) generated	Measuring the cost of filling the funnel
CPA	Conversion actions (a purchase, a signup)	Optimizing campaigns for the chosen action
CAC	New paying customers	Knowing what each customer really costs

How to tell whether your CAC is good

There is no good CAC in absolute terms. $400 per student is expensive for a $300 course and cheap for a $5,000 one. CAC has to be read next to two other numbers.

The first is LTV, the value a customer brings over the whole relationship. In subscription software, a widely quoted benchmark is that LTV should be at least three times CAC, popularized by David Skok in his SaaS Metrics 2.0 guide.

The second is payback, how long a customer takes to pay back the cost of acquiring them. The same guide suggests recovering CAC within 12 months. Outside subscription software the ratios change, but the logic holds: a customer has to return more than they cost, within a time frame your cash flow can survive.

How to lower CAC

• Improve the page's conversion rate. With the same spend, more visitors become customers, and the cost per customer drops.
• Target better. An ad shown to someone who will never buy is a cost with no customer on the other side.
• Qualify leads. Sales time goes to people who fit the profile, and the sales cost per customer falls.
• Invest in channels that compound. SEO and content take longer to pay off, but keep bringing customers after the spending stops.
• Use referrals and retention. A customer who refers someone brings in a new customer at close to zero acquisition cost.

Common calculation mistakes

• Mixing one month's costs with another month's customers.
• Leaving salaries and tools out and still calling the result CAC.
• Looking only at the blended average, which hides the expensive channel.
• Comparing CAC across products with very different prices and sales cycles.

Frequently asked questions

How do you calculate CAC?

Add up what was spent on marketing and sales in a period (ads, tools, agency fees, salaries and commissions) and divide it by the number of new customers won in that same period.

What is the difference between CAC and CPA?

CPA divides cost by a conversion action, such as a signup or a purchase. CAC divides the total acquisition cost by the number of new customers who actually paid.

What is a good CAC?

It depends on how much the customer brings back. In subscription software, a common benchmark is LTV worth at least three times CAC, with the cost recovered within 12 months.

Do salaries count toward CAC?

In fully loaded CAC, yes: the salaries, payroll taxes and commissions of the marketing and sales teams are part of the cost of winning customers. Paid CAC leaves them out.

How do you use CAC and LTV together?

Divide LTV by CAC. The result shows how many times a customer returns what it cost to win them. Below 1, every new customer loses money.

Related terms

• LTVLTV (lifetime value, also called CLV) is the value a customer generates for a business over the entire time...
• CPACPA in marketing is cost per acquisition: how much a business spends on ads to generate each conversion...
• CPLCPL (cost per lead) is how much a business spends on ads to generate each lead, meaning each contact who left...
• ROIROI (return on investment) is the percentage that shows how much an investment earned beyond what it cost...
• KPIA KPI (key performance indicator) is a number chosen to show whether a business is reaching a specific goal...

Sources

• David Skok: SaaS Metrics 2.0, a guide to measuring and improving what matters (For Entrepreneurs)

Rodrigo Fávaro

Founder of ROO3, a marketing and technology agency in São José do Rio Preto, Brazil. Builds AI products running in production (Tobia, gerar.app, Pense Mercado) and maintains the AI Benchmark, a public ranking of AI models.

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