What Is Customer Acquisition Cost (CAC)?
Customer Acquisition Cost (CAC) is the average amount a business spends to acquire one new customer. It is an important business metric because it helps you understand how much you’re investing to generate new customers and whether your customer acquisition strategy is financially sustainable.
How Do You Calculate CAC?
The basic CAC formula is:
CAC = Total Customer Acquisition Costs ÷ Number of New Customers Acquired
For example, if a business spends $5,000 on marketing and sales during a month and acquires 100 new customers, its CAC is $50 per customer.
Your calculation should use costs and new customers from the same period so the comparison is meaningful.
What Counts as Customer Acquisition Cost?
Depending on your business, customer acquisition costs can include:
- Advertising and paid promotions
- Marketing software and tools
- Sales commissions
- Sales and marketing salaries
- Agency or contractor costs
- Content and promotional expenses
The goal is to capture the costs directly associated with acquiring new customers. The exact calculation can vary depending on how your business operates.
Why CAC Matters
CAC becomes especially useful when you compare it with the revenue or profit generated by each customer.
If it costs $50 to acquire a customer who generates only $30 in profit, your acquisition strategy needs attention. If that customer generates substantially more value over time, the $50 acquisition cost may be reasonable.
CAC should therefore be viewed alongside other metrics, especially customer lifetime value, conversion rates, and overall profitability.
Calculate Your CAC
Want to calculate your own customer acquisition cost? Use the ThinksmithOS Customer Acquisition Cost Calculator to quickly estimate your CAC based on your marketing and sales expenses and the number of new customers you’ve acquired.
Understanding your CAC gives you a clearer picture of what it takes to win each new customer. Track it consistently, look for trends over time, and use the numbers to make smarter decisions about where to invest your marketing and sales resources.