Customer Acquisition Cost (CAC) (2025)

FAQs

What is the customer acquisition cost of a CAC? ›

Customer Acquisition Cost, or CAC, measures how much an organization spends to acquire new customers. CAC – an important business metric – is the total cost of sales and marketing efforts, as well as property or equipment, needed to convince a customer to buy a product or service.

What is a good customer acquisition cost? A good cost per acquisition is lower than your customer lifetime value (CLV), ideally about 3 times lower. So if your customer lifetime value is 15$ and your customer acquisition cost is 5$ or less, it's pretty good.

The common benchmark for a good CAC is to keep it significantly lower than the LTV. Ideally, the CAC should be around 1/3 or 1/4 of the LTV. You should keep an LTV to CAC ratio of 3:1 or 4:1.

To find your company's estimated cost of acquiring a new customer, add up all marketing and sales expenses, then divide the total by the number of new customers you acquired. Use this CAC formula: CAC = (Cost of sales + cost of marketing) ÷ Number of new customers.

You divide all of the money spent on acquiring customers (marketing, sales expenses, etc.) by the number of customers you gained in the period that money was spent. For example, if you gained 10 customers and spent $1,000 on a targeted LinkedIn ad in one week, your customer acquisition cost would be $100.

If the business brings in 50 new customers, the CAC is $2,000. If the average sale is $12,000, the business is profitable, but if the average sales are $2,500, then the CAC is way too high. The business needs to either lower the CAC itself or increase the number of new customers.

A lower CAC generally indicates efficient and cost-effective customer acquisition. However, a CAC that is too low may suggest poor investment of funding and resources in acquiring valuable customers. On the other hand, a high CAC relative to LTV may reveal inefficiencies in the customer acquisition process.

CAC scores >300 or >400 are generally considered to represent the highest-risk group in clinical practice.

The formula for this is straightforward: just divide the cost of acquiring a customer by the monthly revenue they generate, to work out how many months' revenue it requires to break-even.

What should not be included in CAC? ›

10 Items NOT to include in SaaS CAC:

User events and all associated expenses. Credit card and payment processing fees. Customer marketing campaigns. Marketing expenses such as corporate branding, logos, general awareness PR if not focused directly on prospects, etc.

LTV measures how much income a customer is expected to bring to your business during the whole time they have a relationship with your business. What is a good CAC ratio? It is said that an ideal LTV to CAC ratio is 3:1.

How do you calculate CAC? The standard CAC calculation is: Total cost of sales and marketing divided by the total number of customers acquired. The variables for this include: Total cost of sales and marketing: The cost of all marketing and sales, including salaries, tools, and spend.

A business' CAC is calculated by dividing all sales and marketing costs by the number of New Customers gained within a specific period. A simple example would be, if Tommy spent $10 to market his lemonade stand and got 10 people to buy his product in 1 week, his cost of acquisition for that week is $1.00.

Customer acquisition cost is the amount of money a business spends to gain a new customer. Here's how to calculate this key metric, plus three ways to improve it. Customer acquisition cost (CAC) is the amount of money an organization spends on advertising and sales initiatives to convert a lead into a customer.

CAC and CPA are very similar and useful metrics, but there is one key difference: CAC measures the cost to acquire a paying customer, while CPA measures the cost to acquire a lead — for example, a registration, activated user, or a sign-up for a free trial.

In other words, CPA indicates how much it costs to get a single customer down your sales funnel, from the first touch point to conversion. That action can be defined as a click, purchase, lead, or a multitude of other options, and will depend on your performance marketing goals.