CAC Formula: The Complete
Customer Acquisition Cost Guide
Master the CAC formula with step-by-step examples, channel analysis, and strategies to reduce acquisition costs.
The CAC Formula
Include all marketing and sales expenses
All spending to acquire customers: ads, marketing team, sales team, tools, agencies.
First-time buyers only. Don't count repeat purchases or existing customers.
Average cost to acquire one new customer. Compare to LTV for unit economics.
Quick Example
You spent $15,000 on marketing last month and acquired 200 new customers.
CAC = $15,000 ÷ 200 = $75
It costs you $75 on average to acquire each new customer.
Know Your Customer LTV
To set the right CAC targets, you need to know your Customer Lifetime Value. StoreRadar calculates LTV automatically for every segment.
CAC Formula Variations
Different ways to calculate and analyze acquisition cost
The standard formula. Include all marketing and sales costs.
Only counts customers from paid channels. Often higher than blended CAC.
Include content creation, SEO tools, and allocated team time.
Most accurate but harder to calculate. Include team costs.
Essential for budget allocation decisions.
Under 12 months is good; under 6 months is excellent.
Worked Examples
Step-by-step CAC calculations
Basic CAC Calculation
Last month you spent $12,000 on Facebook Ads, $8,000 on Google Ads, and $5,000 on marketing tools/salaries. You acquired 320 new customers.
- 1 Total acquisition spend: $12,000 + $8,000 + $5,000 = $25,000
- 2 New customers acquired: 320
- 3 CAC = $25,000 ÷ 320
- 4 CAC = $78.13
Your blended CAC is $78.13 per customer.
If your LTV is $250+, this is healthy (3:1+ ratio). If LTV is lower, you may need to optimize.
CAC by Channel
Break down CAC to find your most efficient channel.
- 1 Facebook: $12,000 spend → 140 customers → $85.71 CAC
- 2 Google: $8,000 spend → 120 customers → $66.67 CAC
- 3 Organic: $5,000 spend → 60 customers → $83.33 CAC
- 4 Blended: $25,000 ÷ 320 = $78.13 CAC
Google has the lowest CAC at $66.67; Facebook highest at $85.71.
Consider shifting budget from Facebook to Google. But also check LTV by channel—Facebook customers might have higher lifetime value.
CAC Payback Period
Your CAC is $78 and customers spend an average of $45/month with 40% gross margin.
- 1 CAC = $78
- 2 Monthly revenue per customer = $45
- 3 Gross margin = 40% = 0.40
- 4 Monthly gross profit = $45 × 0.40 = $18
- 5 Payback = $78 ÷ $18 = 4.3 months
You recover your CAC in 4.3 months.
Excellent payback period. You can reinvest profits quickly and scale confidently.
LTV:CAC Ratio Analysis
Your LTV is $340 and CAC is $78. Evaluate your unit economics.
- 1 LTV = $340
- 2 CAC = $78
- 3 LTV:CAC = $340 ÷ $78 = 4.36
- 4 CAC as % of LTV = $78 ÷ $340 = 23%
Your LTV:CAC ratio is 4.36:1.
Strong ratio—you earn $4.36 for every $1 spent on acquisition. You have room to increase ad spend if you want to accelerate growth.
CAC Benchmarks by Industry
Typical acquisition costs across different business types
| Industry | Typical CAC | Notes |
|---|---|---|
| Ecommerce (General) | $30 - $100 | Varies widely by product and AOV |
| Fashion/Apparel | $50 - $150 | Competitive, visual-heavy marketing |
| Beauty/Cosmetics | $40 - $120 | Strong influencer and social channels |
| Home Goods | $60 - $200 | Higher AOV, longer consideration |
| Food/Beverage (DTC) | $30 - $80 | Subscription models help |
| SaaS (B2C) | $100 - $300 | Higher but offset by recurring revenue |
| SaaS (B2B) | $200 - $1,000+ | Enterprise deals justify high CAC |
Note: These are typical ranges. Your CAC depends on product, market, and competitive landscape.
How to Reduce CAC
Strategies to lower your customer acquisition cost
Improve Conversion Rates
Better landing pages, checkout flow, and UX mean more customers from the same spend.
Optimize Ad Targeting
Refine audiences, use lookalikes, and exclude low-value segments to reduce wasted spend.
Invest in Organic Channels
SEO, content marketing, and social build lower-CAC acquisition over time.
Launch Referral Programs
Referred customers have near-zero CAC and often higher LTV.
Improve Ad Creative
Better creative increases CTR and conversion rates, lowering cost per customer.
Retarget Effectively
Bring back warm visitors at lower cost than cold acquisition.
Common CAC Mistakes
Errors that lead to inaccurate acquisition cost calculations
Only Counting Ad Spend
Ignoring team salaries, software costs, and agency fees understates true CAC significantly.
Include all marketing and sales costs: ads + tools + salaries + agencies + content creation.
Mixing Time Periods
Spend in January may generate customers in February. Misaligned periods skew CAC.
Use consistent attribution windows. Consider the lag between spend and conversion in your business.
Not Segmenting by Channel
Blended CAC hides that some channels are 3x more expensive than others.
Calculate CAC by source. Shift budget to efficient channels; fix or cut inefficient ones.
Ignoring Customer Quality
Low CAC is meaningless if those customers churn quickly or never reorder.
Track LTV by acquisition channel. A $100 CAC customer with $500 LTV beats a $30 CAC customer with $50 LTV.
Forgetting Organic Attribution
Organic customers aren't 'free'—content, SEO, and social have real costs.
Allocate content creation, SEO tools, and team time to calculate true organic CAC.
Static CAC Analysis
CAC changes as you scale—it typically increases as you exhaust efficient audiences.
Track CAC trends over time. Plan for rising CAC as you grow and reach less-targeted audiences.
Related Formulas
Metrics that work alongside CAC
| Formula | Calculation | Relationship to CAC |
|---|---|---|
| Customer Lifetime Value (LTV) | AOV × Purchase Frequency × Lifespan | LTV:CAC ratio is the key health metric |
| LTV:CAC Ratio | LTV ÷ CAC | Should be 3:1 or higher for healthy growth |
| CAC Payback Period | CAC ÷ (Monthly Revenue × Margin) | Months to recover acquisition cost |
| ROAS | Revenue ÷ Ad Spend | Campaign-level efficiency vs CAC's company-level view |
| Conversion Rate | (Conversions ÷ Visitors) × 100 | Higher conversion = lower CAC |
Frequently Asked Questions
Common questions about Customer Acquisition Cost
The CAC formula is: CAC = Total Acquisition Costs ÷ Number of New Customers. For example, if you spent $10,000 on marketing and sales and acquired 200 new customers, your CAC is $10,000 ÷ 200 = $50 per customer.
Include all costs directly related to acquiring customers: advertising spend, marketing team salaries, sales team salaries and commissions, marketing software, agency fees, and content creation costs. Don't include general overhead or product costs.
A good CAC depends on your Customer Lifetime Value (LTV). The benchmark is an LTV:CAC ratio of 3:1 or higher. If your LTV is $300, your CAC should be under $100. Industry and business model also matter—SaaS typically tolerates higher CAC than ecommerce.
CAC (Customer Acquisition Cost) is a company-wide metric including all acquisition expenses. CPA (Cost Per Acquisition) typically refers to the cost of a specific action (lead, signup, or sale) from a particular campaign. CAC is broader; CPA is campaign-specific.
Channel CAC = Channel Spend ÷ Customers from Channel. Track which customers come from each source (Google, Facebook, organic, etc.) and divide that channel's spend by its customer count. This reveals your most efficient acquisition channels.
CAC payback is how long it takes to recover your acquisition cost from a customer. Formula: CAC ÷ (Monthly Revenue per Customer × Gross Margin). If CAC is $100 and monthly gross profit per customer is $20, payback is 5 months.
Know Your Customer LTV
Understanding LTV is essential to setting CAC targets. StoreRadar calculates Customer Lifetime Value automatically so you can evaluate your acquisition efficiency.
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