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Customer acquisition cost (CAC) is the average amount a business spends on sales and marketing to win one new paying customer. You calculate it by dividing your total acquisition costs for a period by the number of new customers you gained in that same period.
CAC = Total sales and marketing costs ÷ Number of new customers
For example, $30,000 of sales and marketing spend that brings in 50 new customers is a CAC of $600. CAC is most useful next to what a customer is worth, so this guide also covers CAC payback period and the LTV to CAC ratio.
Last updated November 2026.
Key takeaways
- CAC stands for customer acquisition cost: total sales and marketing costs ÷ new customers, with both measured over the same period.
- Fully loaded (blended) CAC counts every acquisition cost, including salaries and tools. Paid CAC counts only paid media and the customers those channels brought in. Always say which one you are quoting.
- CAC payback period = CAC ÷ (ARPA × gross margin %): the months it takes a customer to earn back what you spent to win them.
- LTV to CAC ratio = LTV ÷ CAC. 3:1 is a widely used rule of thumb, not a benchmark measured from data.
- There is no single “good” CAC. Judge it against your own trend, your LTV and your payback period.
- Baremetrics Forecast+ calculates CAC from the cost categories you choose in QuickBooks or Xero (marketing only, sales and marketing, or part of engineering for product-led companies) and the new customers Baremetrics counts from your billing data.
What is customer acquisition cost?
Customer acquisition cost (CAC) is the average cost of attracting and converting one new customer: your total acquisition costs divided by the number of new customers they bring in. It covers customers moving from the discovery to the purchase stage in your digital sales funnel.
Common examples of customer acquisition costs include:
- Paid ad expenses
- Lead generation software
- Sales team member salaries
- The cost of hosting free demos or trials
- Lead magnet generation
- Appointment-booking software
- Marketing software
- Social media contests
- Sponsored promotions
- SEO and content marketing expenses
Simply put, all resources, products, salaries, and third-party payments to vendors associated with acquiring new customers go into your CAC.
CAC formula: how to calculate customer acquisition cost
CAC = Total sales and marketing costs ÷ Number of new customers
- Pick a period. A month or a quarter is typical. Use the same period for costs and customers.
- Add up acquisition costs. Ad spend, sales and marketing salaries and commissions, agencies and freelancers, marketing and sales software, content and SEO, events, and the cost of running free trials or demos.
- Count new paying customers. Count customers who went from no plan, a free plan or a trial to a paid plan in the period. Upgrades and reactivations are not new customers.
- Divide costs by new customers. The result is your average cost to acquire one customer.
Remember to account for all costs associated with acquisition, including the salaries of marketing and sales teams and any software used to research, plan, create or execute campaigns that attract or convert customers. Leave out the cost of serving existing customers (support, hosting, customer success for retained accounts), which belongs in your cost of revenue, not CAC.
CAC calculation example
A hypothetical SaaS company spends $30,000 on sales and marketing in a month and gains 50 new paying customers. $15,000 of that is marketing, $9,000 of which is paid media, and 20 of the 50 customers came in through paid channels.
| CAC type | Costs | New customers | CAC |
|---|---|---|---|
| Fully loaded (blended) CAC | $30,000 (all sales and marketing) | 50 (all new customers) | $600 |
| Marketing-only CAC | $15,000 (marketing costs only) | 50 (all new customers) | $300 |
| Paid CAC | $9,000 (paid media only) | 20 (customers from paid channels) | $450 |
Fully loaded (blended) CAC vs paid CAC
The three numbers above are all “CAC”, which is why a CAC figure means little until you know how it was built.
- Fully loaded CAC, often called blended CAC, divides every sales and marketing cost by every new customer, including customers from organic search, referrals and word of mouth. It is the honest number for unit economics, payback and LTV to CAC.
- Paid CAC divides paid media spend by the customers attributed to paid channels. It tells you whether a specific ad budget is working, but it leaves out salaries and tools and counts only the customers paid channels brought in, so it can come out higher or lower than fully loaded CAC.
- Marketing-only CAC sits in between on scope: all marketing costs, no sales costs. It is common in companies where sales and marketing budgets are owned by different teams.
Pick one definition, write it down and keep it consistent over time. To check your numbers against LTV, enter your CAC in the LTV calculator.
Why is customer acquisition cost important?
Your customer acquisition cost is a must-watch number because ultimately you need to be making more money than you spend.
If the average customer lifetime value (LTV) is $500 for your product and you’re spending $506 acquiring them, you’re losing money and you could find yourself in a cash flow crunch,
While it’s uncommon for your CAC to be higher than your LTV, it’s still something you need to watch carefully because it’s not uncommon for CAC and your overhead costs, and product or service production costs to be higher than the revenue brought in by customers.
So, even if the average customer is worth $500, you might only really be able to spend $1 per click on an ad campaign once you consider the fact that:
- You’re paying an ad company $500 a month to run the ad campaigns (which averages to about $10 per acquired customer based on scale)
- Users need to click on an average of three ads to convert ($3 total)
- You need to have a dedicated landing page that cost $50 to create (or $1 per customer)
- Your sales team uses a lead database to create more-relevant personalized demos, which costs $1000 a month ($20 per customer)
- You consider your other production and overhead costs
CAC can help you make smarter decisions so that you can increase your ROI and scale more.
And significantly, that may mean realizing that you should be paying more in CAC to invest in higher-value audiences that are either more likely to convert, or convert at higher values.
Maybe if you pay $5 per click, for example you’ll have a 3% conversion rate at a $500 LTV. And you realize that paying $10 per click for a 8% conversion rate and a $1500 LTV is possible. In this case, it makes sense to invest in the higher quality audience even though each click costs twice as much: at an 8% conversion rate the cost per customer actually falls.
CAC payback period
CAC payback period is the number of months it takes a new customer to earn back what you spent to acquire them, measured on gross margin rather than revenue.
CAC payback period (months) = CAC ÷ (ARPA × gross margin %)
ARPA is average revenue per account per month. In Baremetrics it is reported as ARPU: MRR divided by active customers.
| Input | Value | Working |
|---|---|---|
| CAC (fully loaded) | $600 | From the example above |
| ARPA | $100 a month | MRR ÷ active customers |
| Gross margin | 80% | Gross profit ÷ revenue |
| Monthly gross profit per customer | $80 | $100 × 80% |
| CAC payback period | 7.5 months | $600 ÷ $80 |
The shorter the payback period, the sooner each new customer funds the next one. If customers tend to cancel before they reach the payback point, you lose money on them even when CAC looks reasonable. For the full method, read CAC payback period: formula and how to calculate it.
LTV to CAC ratio
The LTV to CAC ratio compares what a customer is worth over their lifetime with what it cost to acquire them.
LTV to CAC ratio = LTV ÷ CAC
Baremetrics calculates customer lifetime value (LTV) as ARPU ÷ user churn rate. With a $100 ARPU and 5% monthly user churn, LTV is $100 ÷ 0.05 = $2,000. Against the $600 CAC above, the ratio is $2,000 ÷ $600 ≈ 3.3:1.
If you want a stricter test, use gross-margin LTV instead: ($100 × 80%) ÷ 0.05 = $1,600, which gives a ratio of about 2.7:1. Use the same version of LTV every time you compare.
What is a good LTV to CAC ratio? 3:1 is a widely used rule of thumb for SaaS: about $3 of lifetime value for every $1 spent on acquisition. It is a convention, not a benchmark measured from data, so treat it as a sanity check rather than a target. A ratio near 1:1 means you are barely earning back acquisition costs. Read more in what is the LTV to CAC ratio?, or calculate yours with the LTV and LTV:CAC calculator.
How should customer acquisition costs be broken down?
There are a few different ways to break down your CAC.
You have your overall customer acquisition costs, which tell you how much it’s currently costing you to acquire new customers with your marketing and sales expenses as they are.
This is an important metric to watch, because sales funnels are typically complex, and you need to account for the total cost of acquiring customers when making business and pricing decisions.
It can also be a good idea to break down CAC by marketing channel. Looking at which platforms cost more and, in return, if the value of the customers they attract is worth that cost, can help you to optimize your sales funnel for increased revenue and ROI.
Some platforms will be more profitable than others. Facebook Ads, for example, often cost slightly less per click than Google, but Google can help you capture people further in the funnel. It may be expensive to host unique landing pages for different campaigns, but it’s more effective than relying on a single landing page to try to appeal to all audience segments.
That being said, you may realize that certain platforms are not doing what they’re supposed to do. That’s your chance to see if you should switch up your strategies and make some changes.
Keep in mind, however, that looking at per-platform CAC and LTV can be somewhat inaccurate because they don’t tell the full picture. You might get a great lead from a LinkedIn Ad, but you needed that lead database software in order to get the company information needed to target decision-makers at that firm.
Things can be apples to oranges, so try to consider the big picture when looking at platform-by-platform data.
If nothing else, look at first touch-points to see what’s effective at driving high-intent, high-value customers, and look at last-click points to see what helped drive the sale.
How to calculate CAC with Baremetrics data
CAC needs two inputs from two places: costs, which live in your accounting system, and new customers, which live in your billing data. Baremetrics covers both, in different parts of the product.
- In Forecast+: connect QuickBooks or Xero and tag your chart of accounts by department. You choose which cost categories count towards CAC (marketing only, sales and marketing, or even a share of engineering for product-led companies), and Forecast+ calculates CAC as those costs ÷ new customers from Baremetrics. The Forecast+ dashboard charts actual CAC, a forecasted CAC (the average of the last three months) and the number of new customers your budgeted acquisition spend should buy (forecasted acquisition spend ÷ forecasted CAC).
- Know what that number includes. Forecast+ CAC covers whichever cost categories you choose, so it can be a marketing-only CAC, a sales and marketing CAC, or a product-led CAC that includes part of engineering. Pick one definition and keep it consistent so the trend stays comparable.
- Without Forecast+: Baremetrics counts new customers (anyone moving from no plan, a free plan or a trial to a paid plan), ARPU, user churn and LTV straight from your billing data. Take your acquisition spend for the same period from your accounts, divide it by new customers, then use ARPU for payback and LTV for LTV to CAC.
Forecast+ is included in the Scale plan and is also available as a standalone subscription. See plans and pricing.
Source: Baremetrics Help Center (Tagging the Chart of Accounts, Forecast+ Dashboards, Accessing Forecast+ and integrating with your accounting provider, New Customers and Upgrades).
What are the final thoughts on customer acquisition cost?
Analytics and data are crucial to understanding your CAC.
In subscription businesses, this is particularly vital, since CAC can often be slightly higher than standard eCommerce businesses, but the payoff is typically absolutely worth that cost.
Baremetrics is a SaaS-focused, startup-friendly subscription analytics platform. We provide over 25 subscription metrics so that you can understand what’s driving revenue and how to optimize for more profit.
Related metrics: CAC payback period · customer lifetime value (LTV) · LTV to CAC ratio · ARPU · churn rate · gross margin · all SaaS metrics formulas
Baremetrics Forecast+
See your actual and forecasted CAC, month by month
Forecast+ connects to QuickBooks or Xero, takes the acquisition costs you choose to count and the new customers Baremetrics counts from your billing data, and charts your CAC next to revenue, burn and runway. Forecast+ is included in the Scale plan and is also available as a standalone subscription.
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Frequently asked questions
What does CAC mean?
CAC stands for customer acquisition cost: the average amount a business spends on sales and marketing to win one new paying customer. It is calculated as total acquisition costs divided by the number of new customers gained in the same period.
How do you calculate customer acquisition cost?
Add up all sales and marketing costs for a period, count the new paying customers you gained in the same period, and divide: CAC = total sales and marketing costs ÷ new customers. For example, $30,000 of spend and 50 new customers gives a CAC of $600.
What is included in customer acquisition cost?
A fully loaded CAC includes everything spent to win new customers: ad spend, sales and marketing salaries and commissions, agencies and freelancers, marketing and sales software, content and SEO, events, and the cost of running free trials or demos. It excludes the cost of serving customers you already have.
What is the difference between blended CAC and paid CAC?
Blended, or fully loaded, CAC divides all sales and marketing costs by all new customers, including organic and referral customers. Paid CAC divides paid media spend only by the customers who came from paid channels. Paid CAC is useful for judging an ad budget, but it leaves out salaries and tools and counts only paid-channel customers, so it can be higher or lower than blended CAC.
How do you calculate CAC payback period?
Divide CAC by the monthly gross profit each customer generates: CAC payback period = CAC ÷ (ARPA × gross margin %). With a $600 CAC, $100 ARPA and an 80% gross margin, payback is $600 ÷ $80 = 7.5 months. See the full CAC payback period guide.
What is a good LTV to CAC ratio?
LTV to CAC ratio is LTV ÷ CAC. A ratio of 3:1, about $3 of lifetime value for every $1 of acquisition cost, is a widely used rule of thumb for SaaS. It is a convention rather than a benchmark measured from data, so use it as a sanity check alongside your payback period.
What is the average customer acquisition cost?
There is no single meaningful average. CAC depends on your price point, sales motion, channel mix and which costs you include, so a self-serve product and an enterprise product can have very different CACs. Baremetrics does not publish a CAC benchmark. Compare your CAC with your own trend over time and with your LTV and payback period.
Does Baremetrics calculate CAC?
Yes, in Forecast+. Connect QuickBooks or Xero, tag your chart of accounts by department and choose which costs count towards CAC: marketing only, sales and marketing, or even a share of engineering for product-led companies. Forecast+ divides those costs by the new customers Baremetrics counts from your billing data, and its dashboard shows actual and forecasted CAC. Forecast+ is included in the Scale plan and is also available as a standalone subscription.
How can you lower customer acquisition cost?
Either spend less to win the same number of customers or win more customers for the same spend, usually by improving conversion at each funnel stage and moving budget to channels whose customers stay longest. For tactics, see 10 ways to lower customer acquisition costs.
