How to Calculate Customer Acquisition Cost (CAC), with Examples
How to calculate customer acquisition cost: the CAC formula, what spend to include, blended vs paid CAC, payback period and worked examples for a small SaaS.
Mythex Team · · 5 min read
Customer acquisition cost (CAC) is what you spend on sales and marketing to win one new paying customer. The basic formula is total acquisition spend in a period ÷ new paying customers in that period. $2,000 spent and 40 customers won gives a CAC of $50. The formula is easy; the useful part is deciding what counts as spend, which customers to count, and comparing CAC with what a customer is worth.
All figures below are made-up examples to show the arithmetic, not benchmarks.
The basic formula
CAC = sales and marketing costs ÷ new customers acquired
Both sides must cover the same period and the same kind of customer. If you count paid customers, don't include free sign-ups in the denominator.
Example: in March you spend:
| Item | Cost |
|---|---|
| Search ads | $900 |
| Social ads | $400 |
| Freelance writer for blog posts | $500 |
| Email marketing tool | $50 |
| Design contractor for ad creative | $150 |
| Total | $2,000 |
You win 40 new paying customers in March. CAC = $2,000 ÷ 40 = $50.
What to include in acquisition spend
The honest answer is: everything you spend to get customers, not just ads. A checklist:
- Paid media — ads, sponsorships, paid newsletter placements
- Content — writers, designers, video editors, stock assets
- Tools — email marketing, SEO tools, CRM, landing page tools
- People — salaries or contractor fees for anyone doing sales or marketing
- Commissions and referral rewards — affiliate payouts, referral credits
- Events — tickets, travel, booth costs
- Free trial and freemium costs — if serving trial users costs real money (AI features, for example), some teams include it
What to leave out: costs of serving existing customers (hosting, support for paying customers) — those belong in gross margin, not CAC.
Your own time
Founders often leave their own hours out, which makes CAC look tiny. That's fine for a quick number, but misleading for decisions. If you spend 30 hours a month on cold email and it brings 5 customers, that channel isn't free.
Example: value your time at $50/hour (pick your own number). 30 hours = $1,500. Five customers → $300 CAC for cold email, compared with a paid channel at $50. You might still choose cold email because it teaches you more, but you should know the trade.
Blended CAC vs paid CAC
Blended CAC = all acquisition spend ÷ all new customers, including those who came from word of mouth, search and referrals.
Paid CAC = paid-channel spend ÷ customers attributed to paid channels.
Example: of March's 40 customers, 15 came from ads (tracked by UTM tags and sign-up source) and 25 from search, referrals and direct visits. Ads cost $1,300.
- Blended CAC = $2,000 ÷ 40 = $50
- Paid CAC = $1,300 ÷ 15 ≈ $87
Blended CAC is useful for the business as a whole. Paid CAC tells you whether each extra ad dollar pays for itself. If you judged ads by the blended number, you'd overspend.
CAC by channel
Once you have more than one channel, calculate CAC per channel. You need to know where each customer came from:
- Tag links with UTM parameters (
?utm_source=newsletter&utm_campaign=march). - Store the first source on the user record at sign-up, from the UTM tags or the referrer.
- Ask "How did you hear about us?" in onboarding. Self-reported answers catch podcasts, word of mouth and communities that tracking misses.
- Join sign-up source with payment data to count paying customers per channel.
| Channel (example) | Spend | Paying customers | CAC |
|---|---|---|---|
| Search ads | $900 | 9 | $100 |
| Social ads | $400 | 6 | ~$67 |
| Content (writer + tools) | $550 | 12 | ~$46 |
| Referrals (rewards paid) | $150 | 13 | ~$12 |
Content usually takes months to pay off, so a single month understates it. Look at channels over a quarter or longer.
Time lag between spend and customers
Spend in March doesn't always produce customers in March. Someone might click an ad, start a 14-day trial and pay in April. Options:
- Use a longer window (a quarter) so lag evens out.
- Shift the period — compare spend in month N with customers who converted in month N+1 if your trial is about a month long.
- Use cohorts — count paying customers from the group who signed up in March, whenever they converted.
Pick one approach and keep it.
Compare CAC with what a customer is worth
CAC alone means nothing. $200 is cheap for a customer paying $100 a month for years and ruinous for one paying $5 a month for three months.
Payback period (months) = CAC ÷ (monthly revenue per customer × gross margin)
Example: CAC $50, average customer pays $25/month, gross margin 80%. Payback = $50 ÷ $20 = 2.5 months.
LTV:CAC compares lifetime gross profit with CAC. If LTV is $400 and CAC is $50, the ratio is 8. See SaaS metrics explained for how to estimate LTV and why it's fragile with little data.
For a small or self-funded business, payback is usually the number to watch. It tells you how long your cash is tied up in each new customer.
How to lower CAC
- Improve conversion before buying more traffic. If your landing page converts twice as well, CAC halves with the same spend. Start with the headline and the sign-up flow.
- Improve activation. Trial users who reach a real result convert more. Fewer steps to the first result is often the cheapest fix.
- Lean on channels with compounding returns — search content, integrations, referrals, communities — alongside paid ones.
- Narrow targeting. Ads shown to the right small audience usually beat broad ones.
- Raise prices. Counter-intuitive, but a higher price can pay for a higher CAC and attract customers who stay longer. See how to price a SaaS product.
- Stop channels that don't pay back within a period your cash can survive.
More budget-friendly tactics are in how to market a SaaS on a budget.
Common mistakes
- Counting sign-ups instead of paying customers.
- Leaving out tools, contractors and salaries.
- Judging a new channel after two weeks.
- Ignoring refunds and early cancellations — a customer who refunds in week one wasn't really acquired.
- Mixing customer types. An enterprise customer won through a sales call and a self-serve customer from an ad have very different CACs. Split them.
Tracking CAC in your own app
You need two data points per customer: where they came from and whether they pay. If you build your product with Mythex, you can ask the agent to capture UTM parameters and a "how did you hear about us" answer at sign-up, store them in the project's Postgres database, and show CAC per channel on an admin page next to spend you enter each month. The analytics guide covers the event tracking side.
Questions
What is the formula for customer acquisition cost?
CAC is your total sales and marketing spend in a period divided by the number of new paying customers won in that period. For example, $2,000 of spend and 40 new customers gives a CAC of $50.
Should I include my own time in CAC?
For decisions, yes — put a realistic value on the hours you spend on sales and marketing, or at least track them separately. Leaving founder time out makes channels that eat your time look free when they aren't.
What is the difference between blended CAC and paid CAC?
Blended CAC divides all acquisition spend by all new customers, including ones who came from word of mouth or search. Paid CAC divides only paid-channel spend by customers those channels brought in. Blended looks better; paid tells you whether ads work.
What is a good CAC?
There is no universal number. CAC is only good or bad relative to what a customer is worth: compare it with gross profit per customer and aim for a payback period your cash can support.