What Is Customer Acquisition Cost (And How to Calculate It)
How much does it cost you to get one new customer? Not a rough guess. An actual number.
If you spent $3,000 on marketing last month and got 30 new customers, your customer acquisition cost (CAC) is $100. That number determines whether your business can grow profitably.
How to Calculate CAC
CAC = Total Marketing & Sales Costs / Number of New Customers Acquired
Include everything: ad spend, marketing tools, content creation, sales salaries, agency fees — all of it. Only count first-time buyers.
What "Good" Looks Like
Your customer lifetime value (LTV) should be at least 3x your CAC. If a customer spends $300 total over their lifetime, CAC should be under $100.
Rough benchmarks: E-commerce $10-50, service businesses $100-300, SaaS $200-500, local businesses $20-80.
Five Ways to Lower Your CAC
1. Improve conversion rate. Going from 1% to 2% conversion cuts your CAC in half with zero extra ad spend.
2. Double down on organic channels. SEO and content marketing have near-zero marginal cost per customer over time.
3. Build a referral system. Referred customers cost almost nothing to acquire and convert at higher rates.
4. Retain more customers. Higher LTV means you can afford higher CAC while staying profitable.
5. Kill underperforming channels. Calculate CAC by channel and shift budget from expensive to efficient ones.
A Revenue Health Score calculates your Acquisition pillar health, including how effectively you're acquiring customers relative to their worth.