The CAC formula
Use the same period on both sides. If you spent $60,000 on sales and marketing last quarter and won 400 new customers, CAC is $150.
Paid CAC vs. fully loaded CAC
Paid CAC divides only ad spend by new customers. It is useful for comparing channels and campaigns day to day. Fully loaded CAC adds everything it takes to win customers: marketing and sales salaries, agencies, freelancers, software, content production and sales commissions. It is the honest number for unit economics, and the one investors and lenders ask for.
The gap is often large. In the default example, paid CAC is $90 but fully loaded CAC is $150 - a ratio that looks like 15:1 on ad spend alone is really about 9:1.
CAC payback period
Payback tells you how long cash is tied up in each new customer. Under 12 months is generally considered healthy for subscription businesses; longer paybacks need more cash to grow and leave you exposed if customers churn early.
Blended vs. new-customer CAC
Only count genuinely new customers in the denominator. Including returning customers who would have bought anyway makes CAC look lower than it is. If you can, calculate CAC per channel as well as blended - a blended average often hides one channel that is losing money.
How to lower CAC
- Improve landing-page and trial conversion rates - the same spend then wins more customers.
- Cut channels whose CAC is above break-even and move budget to efficient ones.
- Invest in compounding channels such as SEO, referrals and partnerships, whose cost per customer falls over time.
- Raise prices or average order value, which does not lower CAC but improves the ratio to LTV.
Pair this with the LTV calculator and read what LTV:CAC ratio to aim for.
Frequently asked questions
What is a good CAC?
There is no universal number. A good CAC is comfortably below the gross profit a customer brings over their lifetime - typically one third of LTV or less - and is earned back within about 12 months.
Should CAC include salaries?
For fully loaded CAC, yes. Include marketing and sales salaries, agencies and tools. Paid CAC (ads only) is useful for channel decisions but flatters the true cost.
What is the difference between CAC and CPA?
CPA is the cost of any conversion action - a lead, signup or purchase - usually measured per campaign. CAC is the cost of winning a new paying customer, usually across all channels and costs.