Glossary / Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC)
Customer acquisition cost is what you spend, on average, to win one new customer. Divide everything you spent in a month on getting customers by the number of customers you actually got that month.
Work out yours
CAC = total monthly spend on winning customers ÷ new customers won that month
$16
Every new customer costs you about $16 to win.
Why it matters
It is the number that decides whether spending more on growth is brave or reckless. Most owners can name their rent to the dollar and have never once worked this out, which is why they either underspend on a channel that is printing money or keep feeding one that is quietly losing it.
Where people get it wrong
Count everything, not just ads. Directory listings, referral fees, the boosted post you forgot about, and anything you pay a person to bring you work. Leaving those out makes CAC look better than it is and leads to bad decisions.
If this number is not where you want it
If your CAC is low and your channels return, the fix is not cleverness, it is volume. Scaling a channel that already works is the lowest risk money in a small business.
Digital Marketing, Growth, $500 to $1,500 a month
See what it would take, free →About Digital Marketing, GrowthRelated terms
- LTV to CAC RatioThe LTV to CAC ratio compares what a customer is worth to what they cost to win.
- Customer Lifetime Value (LTV)Customer lifetime value is everything one customer pays you across the whole relationship, not just the first sale.
- Payback PeriodPayback period is how long it takes a new customer to pay back what they cost to acquire.
- Conversion RateConversion rate is the share of people who take the action you want.
Common questions
+ How do I calculate customer acquisition cost?
Divide everything you spend in a month to win customers by the number of customers you won that month. If you spend 600 dollars and win 38 customers, your CAC is about 16 dollars.
+ What is a good CAC?
There is no universal number. CAC only means something next to what a customer is worth. A 200 dollar CAC is excellent if a customer pays you 3,000 dollars and terrible if they pay you 250.
Part of the small business glossary. All six free calculators are here.