Customer Acquisition Cost Calculator

The calculation itself

Customer acquisition cost is the total spent acquiring customers divided by the customers acquired: CAC = (marketing + sales cost) ÷ new customers.

The scope of the numerator is where businesses differ. Media spend alone gives a flattering number; media plus agency fees, tools, salaries and creative production gives the honest one.

New customers rather than orders is the other requirement. Dividing by total orders includes repeat purchases and understates CAC by whatever the repeat rate is.

Putting numbers to it

$27,000 of monthly marketing cost producing 1,000 new customers is a $27 CAC.

Now the common error: if 40% of those 1,000 orders came from existing customers, only 600 were new, and CAC is $45 rather than $27, 67% higher.

Against $31.90 of contribution per order, a $27 CAC recovers on the first purchase and a $45 CAC does not. The two numbers support opposite decisions about whether to scale.

Getting the denominator right is therefore worth more than any refinement to the numerator, and it is the more common mistake.

Where the figure deceives

Blended CAC across all channels tells you what the average customer cost and nothing about what the next one will cost. Marginal CAC, the cost of the most recent tranche of customers. Is always higher and is the figure that decides whether to spend more.

Organic and referral customers also enter the denominator while contributing nothing to the numerator, which flatters the blended figure for any business with a strong organic channel.

Acting on it

Count only new customers, and calculate the figure per channel as well as blended. Paid, organic and referral customers have completely different acquisition costs and averaging them hides both the efficient channel and the wasteful one.

Then track marginal CAC by comparing the cost of each incremental tranche of spend. That number rises as spend scales, and the point where it crosses contribution is where growth stops being profitable.

Fully loaded against media-only

A media-only CAC is useful for comparing channels against each other, because it isolates the variable that differs. A fully loaded CAC is what the business actually pays and is the figure that belongs in any LTV comparison.

The gap between them is frequently large. Adding agency fees at 15% of spend, two salaries and a tooling stack to $27,000 of media can take a $27 media CAC past $45 fully loaded.

Quoting the first while modelling the business on the second is how a company concludes it has excellent unit economics and cannot work out where the money goes. Both figures are worth having, provided which is which is stated every time either appears.

Seasonality distorts the figure badly in retail, since a strong December can produce a flattering CAC that will not repeat in February. A trailing twelve-month calculation is the more reliable basis for any decision that persists beyond a quarter.

Attribution also decides which channel carries which cost, so a business with a generous last-click model will report an artificially low CAC for retargeting and a high one for everything that created the demand it captured.

Payment terms with agencies and platforms also affect the cash version of this figure, since spend billed monthly in arrears is cheaper to fund than spend prepaid.