What is CAC?

CAC stands for Customer Acquisition Cost. In plain terms, it’s how much you spend—on ads, tools, teams, and more—to bring in one new customer. Think of it like figuring out your cost-per-customer: you add up your sales and marketing expenses, then divide by the number of new customers you got. It’s a key measure of how effective your efforts are at turning interest into paying users.

Why does CAC matter to you?

CAC shows whether you’re spending smart. If it costs more to get a customer than you make from them, something’s off—simple as that. Compare CAC to LTV (Customer Lifetime Value): that tells you if you’re making a return. Many experts say aim for an LTV:CAC ratio of at least 3:1—meaning a customer should bring in three times what it cost to acquire them.

How do you calculate CAC?

Here’s a straightforward method:

  1. Pick a timeframe — month, quarter, or year.
  2. Add up all costs: paid ads, marketing and sales salaries, tools, agency fees, even event costs.
  3. Count new customers in the same period.
  4. Use this formula:
CAC = Total Sales & Marketing Costs ÷ Number of New Customers

For example, if you spent $40,000 last quarter and got 160 new customers, CAC = $250.

What should a “good” CAC look like?

There’s no universal magic number—industries vary widely. But two big clues help:

  • LTV ratio – aim for at least 3:1 (i.e., customers bring in three times more than it costs to get them)
  • Industry benchmarks – for SaaS, CAC might range from $200–$700 or more; e‑commerce brands often see $50–$150

CAC vs. CPA – what’s the difference?

They sound alike but aren’t the same:

  • CAC = cost to bring in a paying customer (all-in sales & marketing costs).
  • CPA = cost for a specific action (like a click, lead, or form submit).

CAC is about full-funnel efficiency. CPA is more campaign-specific. Know the difference to avoid confusing your metrics.

How can you lower your CAC?

Lowering CAC isn’t just about slashing budgets—it’s about spending smarter:

  • Boost conversions: A/B test your landing pages, CTAs, or checkout flows to turn more visitors into buyers.
  • Track channels separately: See which platforms bring cost-effective customers and invest more there.
  • Leverage content & SEO: Organic content builds over time, reducing reliance on ads.
  • Refine targeting: Narrow your audience to those most likely to buy—better targeting = lower waste.

Small gains in conversion or targeting can dramatically drop your CAC.

Tips: Making CAC work for you

📊 Track it regularly – Monthly or quarterly tracking helps spot trends and prevent overspending.

🧮 Include all costs – It’s easy to count ads and forget salaries, tools, or event expenses. Include it all or you’ll understate CAC.

⚖️ Compare with LTV – Low CAC is good, but if your LTV is tiny, you still won’t turn a profit. Track both together.

⏱️ Consider CAC payback period – How long until each customer covers their acquisition cost? Under 6 months is a healthy sign.

Bottom line

CAC gives you a clear answer to: Is your customer growth worth the investment? When you track it, compare it to benchmarks, and aim to lower it smartly, you set yourself up for profitable, sustainable growth. Keep an eye on CAC, and you’ll know exactly how cost-effective your marketing really is.

Want to explore CAC deeper? You can start by tracking it channel by channel, comparing it to your LTV, and running A/B tests—those moves alone can make a big difference.