CAC Calculator

CAC is everything you spend to win customers in a period divided by the new paying customers of the same period: ads, but also sales and marketing salaries, tools, agencies and events. Product development and support for existing customers stay out.

The calculator gives blended CAC: all costs over all new customers. Paid CAC divides only paid spend by customers who came through paid channels. When many customers arrive through word of mouth or search, blended CAC looks lower than what a paid channel really costs.

If deals take months to close, this month's customers came from spend a few months ago. Shift the period of spend back by that lag, or average several months.

In one month a company spent $7,000 on ads and $5,000 on other sales and marketing costs, and won 20 new paying customers.

CAC = (7,000 + 5,000) ÷ 20 = $600 per new customer.

Each customer brings $80 of gross profit a month and 3% cancel monthly, so LTV is $2,666.67, LTV:CAC is 4.4 : 1 and the cost is earned back in 7.5 months (month 9 with churn).

Churn is first converted to the billing period by compounding: 3% a month is 1 − 0.97¹² = 30.6% a year, not 36%. The calculator never multiplies or divides churn by 12.

c_year = 1 − (1 − c_month)^12      c_month = 1 − (1 − c_year)^(1/12)
gross profit g = ARPA × margin
LTV = g ÷ c                        (capped: g × (1 − (1 − c)^H) ÷ c)
CAC = (paid media + other costs) ÷ new paying customers
LTV:CAC = LTV ÷ CAC
payback = CAC ÷ monthly g
payback with churn = first month t with g × (1 − (1 − c)^t) ÷ c ≥ CAC

LTV assumes a constant churn rate and that a customer pays at the start of each period while still active, so the expected number of payments is 1 ÷ churn. LTV uses gross profit (revenue × margin), because margin is what pays back the acquisition cost; revenue LTV is shown on the side.

With a lifetime cap of H periods, LTV = gross profit × (1 − (1 − churn)^H) ÷ churn. At 0% churn there is no finite LTV without a cap.

CAC is blended: all sales and marketing costs of a period divided by all new paying customers of that period. Simple payback is CAC ÷ monthly gross profit. Payback with churn is the first month in which the expected cumulative gross profit of a new customer reaches CAC; with annual billing it is counted in annual payments.

How do you calculate CAC?

Add up all sales and marketing costs of a period and divide by the new paying customers won in the same period. $12,000 of costs and 20 new customers give a CAC of $600.

Which costs belong in CAC?

Ads, sales and marketing salaries (including commissions), marketing and sales tools, agencies, content production and events. Leave out product development, hosting and support of existing customers: those belong in gross margin or operating costs.

What is the difference between blended and paid CAC?

Blended CAC divides all costs by all new customers. Paid CAC divides paid spend by the customers that paid channels brought. If half of your customers come organically, blended CAC can be half of what an extra paid customer costs, so use paid CAC when deciding on ad budgets.

What if deals take months to close?

Then the customers of this month came from spend in earlier months. Match them by shifting the spend period back by the typical sales cycle, or use a quarter or more of data so the lag matters less.

What is a good CAC?

There is no good CAC on its own: $600 is cheap for a customer worth $5,000 and ruinous for one worth $300. Judge CAC against LTV and the payback period, both of which this calculator shows.

• CAC (customer acquisition cost)
• CAC
• LTV (customer lifetime value)
• payback period
• cohort ROI

• LTV calculator and LTV:CAC ratio

  Customer lifetime value and the LTV:CAC ratio.

• CAC payback period calculator

  How long a new customer takes to earn back its CAC.

• Churn rate and NRR calculator

  Customer churn, revenue churn, GRR and NRR for one period.