Enter your spend and new customers to see your CAC.
How the CAC formula works
CAC = total sales and marketing spend in a period / new customers acquired in that same period. Spend $3,000 in a month and close 25 new customers, and your CAC is $120.
The number is only as honest as the spend you count. Include ad spend, content and SEO costs, tool subscriptions, affiliate payouts, and the loaded cost of anyone doing sales or marketing. Solo founders should price in their own time too: 20 hours a month spent on marketing is not free, and pretending it is makes paid channels look worse than they are by comparison.
One subtlety: spend this month often converts next month. At small volumes just use a consistent window and accept the noise; at larger volumes, compare this month's customers against last month's spend if your sales cycle is long.
Why CAC matters
CAC is half of the only equation that decides whether growth is worth buying: what a customer costs versus what a customer is worth (LTV). A commonly cited target is an LTV to CAC ratio of at least 3 to 1. The ratio is channel-specific in practice: content might acquire customers at $40 while paid ads cost $250 for the same product. Computing CAC per channel shows where the next dollar should go.
The payback period makes CAC concrete for cash flow: CAC divided by monthly gross profit per customer. A $120 CAC recovered at $24 of gross profit a month takes 5 months to pay back. Commonly cited guidance for self-funded companies is payback under 12 months, because until payback, every new customer costs you money.
Benchmarks, honestly
Absolute CAC benchmarks travel poorly because they scale with price point: a $500 CAC is catastrophic for a $9 a month tool and excellent for a $500 a month platform. The portable benchmarks are the ratios: LTV to CAC around 3 to 1 or better, and payback under about a year. For early self-serve products, organic channels (search, communities, word of mouth) commonly deliver CACs an order of magnitude below paid ads, which is why most bootstrapped SaaS growth strategies start there.
Frequently asked questions
How do I calculate customer acquisition cost?
Divide your total sales and marketing spend for a period by the number of new customers you acquired in that period. If you spent $3,000 last month and won 25 new customers, your CAC is $120.
What costs should be included in CAC?
Everything spent to acquire customers: ad spend, content production, SEO tools, affiliate commissions, sales and marketing salaries, and relevant software. Solo founders should also price in their own hours, otherwise organic channels look free when they are actually paid for in time.
What is a good CAC?
There is no universal number because CAC scales with what a customer is worth. The useful tests are relative: LTV should be at least about 3 times CAC, and the payback period should be under about 12 months if you are funding growth from revenue.
What is the CAC payback period?
The number of months it takes a new customer to generate enough gross profit to cover their own acquisition cost: CAC divided by monthly gross profit per customer. A $120 CAC at $24 of monthly gross profit pays back in 5 months.
Should I calculate CAC per channel?
Yes, once you have more than one channel. A blended CAC hides the fact that one channel may be profitable and another deeply underwater. Per-channel CAC against the same LTV tells you where to put the next dollar or the next hour.
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