What is CAC (customer acquisition cost)?
How is CAC calculated?
CAC divides acquisition spend by new customers won. Add up everything spent to win customers in a period, advertising, campaign costs, and the salaries and commissions of the sales and marketing teams, then divide by the number of new customers that period. Suppose a business spent 5,000 on sales and marketing in a month and gained 25 customers: CAC is 5,000 ÷ 25 = 200 per customer. The figure is only honest if the spend genuinely covers acquisition and not the cost of serving customers you already have.
Why does CAC matter?
On its own, CAC is just a cost. Its value comes from the comparison with customer lifetime value: the ratio of the two shows whether each customer earns back more than they cost to win. A customer worth 1,000 over their life who cost 200 to acquire returns five times the spend. When acquisition cost rises toward lifetime value, growth stops funding itself, so the two figures are almost always tracked as a pair rather than alone.
What is the CAC payback period?
Payback asks how long it takes to earn the acquisition cost back. If a customer brings 50 a month in gross profit and cost 200 to acquire, payback is 200 ÷ 50 = 4 months. A shorter payback means the business recovers its outlay before churn has much chance to bite, which matters most for teams funding growth from their own cash rather than raising it. It pairs naturally with the LTV to CAC ratio: one measures the size of the return, the other how quickly it arrives.
Reading CAC from your exports
CAC combines two sources: a record of sales and marketing spend, often a spreadsheet or an export from an ad platform, and a count of new customers from a subscriptions or CRM export. Rather than reconcile the two by hand, you can open both files and ask for spend divided by new customers in plain English. Paperswift analyses the exports in your browser, and only your column names and their types are sent when you ask, never the values in your rows. That keeps a marketing spend file off any server, unlike pasting it into a general chatbot, a trade-off our ChatGPT, Claude or Gemini note covers.
Frequently asked questions
What costs go into CAC?+
CAC should include the full cost of acquiring customers: advertising and campaign spend, the salaries and commissions of sales and marketing staff, and the tools those teams use. Leaving out salaries is a common mistake that makes acquisition look cheaper than it is. Product and support costs are excluded, since they serve existing customers rather than win new ones.
How is CAC calculated?+
Add up all sales and marketing spend for a period, then divide by the number of new customers acquired in that same period. Keep the two windows aligned, and be careful with lag: spend in one month often wins customers in the next, so smoothing over a quarter usually gives a steadier and fairer figure.
What is a good LTV to CAC ratio?+
A widely cited rule of thumb looks for lifetime value around three times acquisition cost, leaving room for overheads and profit. Below that, growth strains margins; far above it, you may be underinvesting in acquisition. The right target depends on your margins and payback expectations, so treat three-to-one as a starting point, not a law.
What is CAC payback period?+
CAC payback is how many months of a customer's revenue, or gross profit, it takes to earn back what you spent to acquire them. A shorter payback frees up cash to reinvest sooner and lowers the risk that churn strikes before the customer becomes profitable. Many subscription teams aim to recover acquisition cost within roughly a year.
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Start free todayLast updated · by Stefan