Formula
How to Calculate Customer Acquisition Cost
The total cost of acquiring a new customer, including all sales and marketing expenses.
Customer Acquisition Cost
CAC = Total Sales & Marketing Spend / New Customers Acquired
Where
- S&M Spend
- = Total sales and marketing expenses in a period
- New Customers
- = Number of new customers acquired in the same period
What Is Customer Acquisition Cost?
Customer Acquisition Cost (CAC) measures the total cost of winning a new customer, calculated by dividing total sales and marketing spend by the number of new customers acquired in a period. Blended CAC includes all customers (organic and paid), while paid CAC focuses only on paid channels. CAC is most meaningful when compared to Lifetime Value (LTV) — the LTV:CAC ratio should typically exceed 3:1 for sustainable growth.
Worked Example
A company spends $500K on sales and marketing in a quarter and acquires 50 new customers. CAC = $500K / 50 = $10K per customer. With $36K LTV, the LTV:CAC ratio is 3.6x.
Why Customer Acquisition Cost Matters
CAC determines whether growth is economically sustainable. Rising CAC signals market saturation or inefficient go-to-market, while declining CAC suggests strengthening brand or product-led growth.
Related Terms
Frequently Asked Questions
How do you calculate Customer Acquisition Cost?
Customer Acquisition Cost is calculated using the formula: CAC = Total Sales & Marketing Spend / New Customers Acquired. The total cost of acquiring a new customer, including all sales and marketing expenses.
What is a good Customer Acquisition Cost?
What constitutes a "good" Customer Acquisition Cost depends on context — the fund's stage, vintage year, and strategy. Check our benchmarks and calculators for specific ranges.