CAC Calculator: Customer Acquisition Cost and Payback
Customer acquisition cost (CAC) is your sales and marketing spend divided by the new customers it brought in. Payback is how many months of gross profit it takes to earn that cost back.
By Suren, Founder & Growth Strategist at Gufy · Last updated
The formulas
| Measure | Formula |
|---|---|
| CAC | Sales and marketing spend ÷ new customers in the same period |
| Monthly gross profit per customer | Monthly revenue per customer × gross margin |
| Payback (months) | CAC ÷ monthly gross profit per customer |
Worked example: $30,000 of sales and marketing spend wins 60 customers, so CAC is $500. Each pays $99 a month at a 75% gross margin, which is $74.25 of gross profit a month. Payback is $500 ÷ $74.25 =6.7 months.
Mistakes that make CAC look better than it is
- Counting only ad spend. Agency fees, tools and the salaries of the people running acquisition are part of the cost.
- Counting sign-ups instead of paying customers. A $5 install is not a $5 customer if only one in nine installs ever pays.
- Mixing periods. Spend and customers should come from the same window, allowing for a sales cycle if deals take weeks to close.
- Using revenue instead of gross profit for payback. Payback on revenue ignores what it costs to serve the customer.
How to lower CAC
- Fix conversion before buying more traffic. A landing page or sign-up flow that converts twice as well halves CAC with the same ad spend.
- Fix activation. If trial users never reach the product’s value, they never pay. SaaS onboarding covers the steps.
- Measure CAC by channel. Blended CAC can hide one channel that loses money. Paid acquisition should be judged on paying customers, not clicks.
For lifetime value and the LTV:CAC ratio, see Unit economics for startups. To see how CAC affects how long your cash lasts, use the burn rate and runway calculator.
Common questions
What is a good customer acquisition cost?
It depends on what a customer is worth. The usual target is a lifetime value of about three times CAC, and a payback period under 12 months for a subscription business. A $500 CAC is excellent for a product customers pay $200 a month for and ruinous for one at $5.
What should be included in CAC?
Everything you spend to win new customers in the period: advertising, agency and freelancer fees, sales and marketing salaries, tools, content and events. Leaving out salaries or fees makes CAC look better than it is.
What is a good CAC payback period?
Under 12 months is the common benchmark for subscription businesses. With little funding, aim for much less, because you finance every month of payback yourself.
What is the difference between blended CAC and paid CAC?
Blended CAC divides all acquisition spend by all new customers, including those who came from word of mouth or organic search. Paid CAC divides only paid media spend by the customers that paid media brought in. Blended CAC flatters paid channels; paid CAC shows whether the ads themselves pay back.
Where Gufy fits
Lowering CAC is most of what Gufy does: tracking that shows which channel brings paying customers, paid campaigns judged on revenue, and fixing the landing pages and onboarding in between. For KOBA Insurance, that work cut the cost of acquisition by 70%; the case study has the detail.