What Is Customer Acquisition Cost?

Customer acquisition cost (CAC) is the average amount a business spends on sales and marketing to win one new customer.

Category: Finance and metrics · Reviewed 11 November 2026 · 1 min read

How it works

The formula in words: CAC equals total sales and marketing spend in a period divided by the number of new customers won in that period. Spend usually includes ad budgets, sales salaries, commissions, tools and agency fees. Some founders include only paid spend, which makes the number look better; be consistent and say which you use.

Compute it per channel when you can. A blended average can hide one expensive channel and one cheap one.

Example

For example, in one month a company spends $8,000 on ads and $4,000 on a part-time salesperson, so $12,000 total. It wins 60 new customers. CAC is $12,000 divided by 60, or $200. If a customer pays $50 a month and the company keeps 60 percent of that as gross profit, each customer brings in $30 a month in gross profit. Payback takes about seven months.

Why founders care

CAC tells you how much you can afford to spend to grow. Paired with customer lifetime value, it shows whether acquiring customers pays off. A rising CAC is an early warning that a channel is saturating or that your offer is weakening.

Common mistakes

• Leaving out salaries and tools, so CAC looks too low.
• Counting free or organic customers in the denominator without saying so.
• Judging CAC on a tiny sample of customers.

Frequently asked questions

What is a good CAC?

One that is comfortably lower than the gross profit a customer brings over their lifetime, and that pays back within a period you can fund. Benchmarks differ by industry and price, so compare to similar businesses.

What is CAC payback period?

It is how many months of a customer's gross profit it takes to recover the cost of acquiring them. It equals CAC divided by monthly gross profit per customer.

Related terms

• Lifetime Value
• Unit Economics
• Churn Rate
• Gross Margin
• Growth Hacking

Go deeper

• Startup Metrics That Matter: MRR, Churn, CAC and LTV GuideStartup metrics explained in plain English: MRR, ARR, churn, CAC, LTV and more, with formulas in words, worked examples, and what investors ask for.
• How to Get First Customers: 10, then 100, Without a Budget GuideHow to get first customers for your startup: find early adopters, run cold outreach, do things that don't scale, and reach 10 then 100 with little or no money.

All 70 startup terms · More terms starting with C · Guides

General information, not legal, tax or financial advice. Reviewed 11 November 2026.