CAC Calculator
$48 to win a customer worth $600: a healthy 12.5:1 LTV to CAC.
What is CAC?
CAC (customer acquisition cost) is total sales and marketing spend divided by the new customers that spend won. Spend 6,000 to acquire 125 customers and CAC is 48: that is what the average customer cost to bring in.
A CAC figure on its own is neither good nor bad. A 48 CAC is cheap for a business whose customers are worth thousands and ruinous for one whose customers are worth 40.
That is why CAC is judged against lifetime value. The common test is the LTV:CAC ratio, and the rule of thumb is 3:1 or better: a customer should be worth at least three times what they cost to acquire.
How to calculate CAC
CAC = Spend ÷ New customers · judged vs LTV (aim CAC ≤ LTV ÷ 3)
- Total the acquisition spend. Add up what you spent winning customers over the period: ad spend, and for a fully loaded number, agency fees, salaries and tools too.
- Count the new customers. Count only the paying customers that spend acquired in the same period, not leads or trials.
- Divide spend by customers. Spend divided by new customers is your CAC. 6,000 divided by 125 is a CAC of 48.
- Check it against lifetime value. Divide lifetime value by CAC for the LTV:CAC ratio. A 600 lifetime value against a 48 CAC is 12.5:1, comfortably above the 3:1 floor.
Worked example
A business spends 6,000 on sales and marketing, wins 125 new customers, and each is worth 600 over their lifetime.
| Total sales & marketing spend | $6,000 |
|---|---|
| New customers acquired | 125 |
| Lifetime value per customer | $600 |
| Result | $48.00 CAC · healthy |
Each customer cost 48 to acquire and is worth 600, an LTV:CAC ratio of 12.5:1, far above the 3:1 rule of thumb. The most you could pay and stay healthy is 200 (600 divided by 3).
What is a good CAC?
CAC has no universal target in cash terms, so the benchmark is the LTV:CAC ratio: lifetime value divided by CAC. These bands are the common growth-health heuristic, not a hard law.
| CAC | Read |
|---|---|
| Healthy 3:1 or higher | A customer is worth at least 3x what they cost |
| Thin 1:1 to 3:1 | Profitable but little room to reinvest |
| Unprofitable Below 1:1 | You lose money on each customer acquired |
The 3:1 figure is a widely used heuristic, not a rule that fits every model. Long-payback or land-and-expand businesses sometimes run thinner ratios on purpose; check it against your payback period too.
How to improve CAC
- Lift conversion rate so the same spend turns more clicks into customers, dropping CAC directly.
- Shift budget toward the channels and audiences with the lowest cost per customer, not just the lowest cost per click.
- Strengthen lifetime value with retention and upsells: a higher LTV makes the same CAC healthier without cutting spend.
- Trim the funnel leaks (slow pages, weak onboarding) that waste acquisition spend before it converts.
Frequently asked questions
- What is CAC and how do you calculate it?
- CAC (customer acquisition cost) is your total sales and marketing spend divided by the number of new customers it won. Spend 6,000 to acquire 125 customers and your CAC is 48. It answers one question: what did the average new customer cost to bring in?
- What is a good CAC?
- There is no single good CAC, because it only means something next to what a customer is worth. The standard test is the LTV:CAC ratio: lifetime value divided by CAC, with 3:1 or higher treated as healthy. A 48 CAC against a 600 lifetime value is 12.5:1, well clear of the rule of thumb.
- Is a $50 CAC good?
- It depends entirely on lifetime value. A 50 CAC is healthy if a customer is worth 150 or more (a ratio of 3:1 or better), break-even-ish around 50 to 150, and loss-making below 50. The cash figure on its own tells you nothing without the value behind it.
- What is the difference between CAC and CPA?
- CAC is the cost to win a paying customer and usually counts all sales and marketing spend, not just ads. CPA (cost per acquisition) is the cost of a single conversion event, which might be a lead or signup rather than a paying customer. Every CAC is a CPA, but most CPAs are cheaper, earlier actions in the funnel.
- Should CAC include salaries and tools, or just ad spend?
- A fully loaded CAC includes everything it took to acquire customers: ad spend, agency fees, sales and marketing salaries, and the tools they use. A paid-only CAC counts media spend alone. Both are valid, but compare like with like, and a blended fully loaded CAC is the more honest read on whether growth pays for itself.