CAC calculator

Customer acquisition cost is everything spent on sales and marketing in a period divided by the customers won in it. Type any two of spend, new customers and CAC and the third is filled in; add lifetime value, monthly revenue and margin for the LTV to CAC ratio and the payback period.

Under it: the formula, what to count and what to leave out, blended against paid CAC, worked examples, the ratio and the payback that decide whether a CAC is good, how to lower one, and what a position costs on a board where every amount is public.

Sales and marketing spendEverything spent to win customers in the period: media, tools, agency fees, the people.New customersCustomers won in the same period. Paying ones, not sign-ups.CACSolvedWhat one new customer cost to acquire.

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Lifetime value of a customerGross profit one customer brings over the time they stay. Leave it if you do not know it yet.Monthly revenue per customerWhat one customer pays in a month, for the payback line.Gross marginWhat is left of a dollar of revenue after the cost of serving it.

CAC$150.00

Each new customer cost $150.00 to win. Ten more at that rate is $1,500.

LTV to CAC: 4 : 1three to one or better is the usual bar
Payback: 4.3 monthsmonths of gross profit to earn the acquisition cost back

What customer acquisition cost is

Customer acquisition cost is what it costs, on average, to win one paying customer. It is the whole cost of selling divided by the number sold to: media, tools, agency fees, the salaries of the people who market and sell, over a period, divided by the customers who started paying in that period.

It is the number that turns a marketing budget into a business question. A CAC on its own is neither good nor bad; beside what a customer is worth over the time they stay, it is the difference between growth that pays for itself and growth that is being financed.

The CAC formula

CAC = total sales and marketing spend in the period / new customers won in the period.

New customers = spend / CAC. How many a budget should win at a known cost.
Spend = customers x CAC. What a customer target will cost.

LTV to CAC = lifetime value / CAC. Lifetime value is the gross profit a customer brings over the time they stay: monthly revenue, times margin, times the months they last. Three to one is the usual bar.

Payback = CAC / (monthly revenue x margin). The months of gross profit it takes to earn the acquisition cost back.

What to count, and blended against paid

Count everything spent to win customers: media, the tools the team uses, agency and freelance fees, content, events, and the fully loaded cost of the people in marketing and sales. Leave out the cost of serving customers once won, which belongs in margin, and leave out spend aimed at existing customers, which is retention.

Count paying customers, not sign-ups. A free trial is a lead. A customer is somebody who has paid, and the period is the one they paid in, which may be a month after the spend that won them; over a quarter or a year the timing evens out.

Blended CAC counts all spend against all new customers, including the ones who arrived on their own. It is the figure for the whole business.
Paid CAC counts only the paid channels against the customers they can be credited with. It is the figure for deciding whether to spend the next dollar on that channel.
The gap between the two is what word of mouth, search and the brand are worth. A business whose blended CAC is half its paid CAC has an asset the paid channels do not show.

Worked examples

Payback is CAC divided by monthly gross profit. LTV is gross profit over the customer's life.
Spend	New customers	CAC	LTV	LTV to CAC	Payback
$3,000	120	$25	$90	3.6 : 1	1 month at $30 a month, 80% margin
$12,000	80	$150	$600	4 : 1	4.3 months at $50 a month, 70% margin
$60,000	25	$2,400	$9,000	3.75 : 1	10 months at $300 a month, 80% margin
$20,000	50	$400	$500	1.25 : 1	13.3 months at $50 a month, 60% margin

The fourth row is the one to watch for. It pays back, so it is not losing money, but it takes more than a year to do it and leaves a hundred dollars of profit per customer at the end. A business growing on that ratio is financing every new customer for thirteen months, and the faster it grows the more cash it needs.

What a good CAC is

One that is a third or less of what the customer is worth, and one that is earned back inside a year. The two rules are different questions: the ratio asks whether the customer is profitable at all, and the payback asks whether you can afford to wait.

LTV to CAC of three to one or better. Below that the margin after acquisition is thin; below one to one every customer is a loss.
Payback under twelve months for a business funding its own growth. Sales-led businesses with large contracts run longer, and pay for it with the capital that lets them.
A CAC that is falling or flat as spend rises. A CAC that climbs with every increase in budget is a channel that has run out of the customers it was good at reaching.

How to lower a CAC

Convert more of the traffic you already pay for. Every point of conversion rate is a cut in CAC with no change to the media bill.
Find the channel with the customers nobody else is buying. A CAC on an auction rises with every competitor; a placement priced by the position does not.
Ask customers to bring customers. A referral that costs a month's credit is usually the cheapest acquisition a business has.
Retire the channels that only look cheap. A channel with a low paid CAC and customers who leave in two months has a worse LTV to CAC than an expensive one whose customers stay.

What a customer costs from The Board

The panel under the calculator places your spend on the board live and shows the brand holding that position today, with the clicks it has earned while it did. Divide the position's cost by the clicks for its cost per click so far; multiply the clicks by your own conversion rate for the customers, and the CAC that follows is one you can check against a public price rather than an auction report.

There is no benchmark band on this calculator on purpose. A CAC is only good or bad beside what a customer is worth to your business, and that is a number this page cannot know.

Questions people ask about a cac calculator

How do you calculate customer acquisition cost?

Add up everything spent on sales and marketing in a period and divide by the number of new customers won in it. $12,000 of spend that won 80 customers is a CAC of $150.

What is a good CAC?

One that is a third or less of the customer's lifetime value, and one earned back inside a year. Three to one is the usual bar for LTV to CAC; a ratio under one means each customer costs more than they are worth.

What should be included in CAC?

Media spend, marketing tools, agency and freelance fees, content, events, and the fully loaded salaries of the people in marketing and sales. Leave out the cost of serving customers once won, and spend aimed at customers you already have.

What is the difference between CAC and CPA?

Cost per acquisition prices any result a campaign was for, such as a lead or a sign-up. Customer acquisition cost prices a paying customer, and counts every cost of selling rather than one campaign's media.

What is the LTV to CAC ratio?

Lifetime value divided by customer acquisition cost. Lifetime value is the gross profit a customer brings over the time they stay. Three to one or better is the usual target.

How do I calculate CAC payback?

Divide CAC by monthly gross profit per customer, which is monthly revenue times gross margin. A $150 CAC on a customer paying $50 a month at a 70% margin pays back in about 4.3 months.

What is blended CAC?

All sales and marketing spend divided by all new customers, including the ones who arrived without a paid channel. Paid CAC counts only paid spend against the customers it can be credited with. The gap between the two is what word of mouth, search and the brand are worth.

Why is my CAC going up?

On paid channels, more competition for the same audience and a channel running out of the customers it was good at reaching. Inside the business, a falling conversion rate or a sales team that has grown faster than the customer count.

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All of them are on the free tools page. Every one is free, asks for no account, and stores nothing of yours on our side. A listing on The Board is a logo, a line and a link, from $1, and every number on the board is public.