Customer acquisition cost, or CAC, is the cost of winning new customers, calculated by dividing acquisition costs by the number of new customers acquired.
It links sales and marketing spending to customer growth and helps test whether acquisition is affordable. Return to the business plan glossary for related terms.
Formula and calculation
CAC = Sales and marketing acquisition costs ÷ New customers acquired
Define which costs are included and align spending with the acquisition period or cohort, especially for long sales cycles. A fully costed CAC includes relevant sales and marketing payroll, commissions, agency costs, advertising and tools with a documented allocation. A paid-ad-only measure is narrower and should be labelled. Count customers rather than leads, visits or repeat orders.
Worked example: illustrative figures
Illustrative example: Beacon Desk is a fictional subscription-service startup. For an illustrative acquisition cohort it incurs $6,000 advertising, $3,000 allocated sales payroll and $1,000 agency and tool costs, winning 50 new paying customers. Amounts use one currency, USD or CAD, and assume the spending and customer cohort are aligned.
| Item | Amount |
|---|---|
| Advertising | $6,000 |
| Allocated sales payroll | $3,000 |
| Agency and tools | $1,000 |
| Total acquisition costs | $10,000 |
| New paying customers | 50 |
| CAC | $200 per customer |
CAC is ($6,000 + $3,000 + $1,000) ÷ 50 = $200 per new customer. Ad-only cost per acquisition would be $6,000 ÷ 50 = $120, but leaves out $4,000 of relevant costs. If each customer contributes $50 monthly after variable delivery costs, simplified payback is $200 ÷ $50 = four months, assuming customers remain active and ignoring payment delays and other overhead.
How to interpret the result
Compare acquisition cost with customer contribution, retention and cash timing, not just revenue. Lifetime value is an estimate of future customer economics and depends on churn and margin assumptions; its definition must be consistent with CAC. Blended CAC combines channels, while channel-specific results can reveal where spending is less effective. With no new customers, CAC is undefined rather than zero.
Using this measure in a business plan
Build new customers from channel activity, conversion and sales capacity, then connect the costs to payroll and marketing budgets. Distinguish new from returning customers, document attribution and test weaker conversion or faster churn. Reconcile acquisition spending with available cash because payback may arrive months after spending.
For help connecting assumptions to the financial statements, see our financial modelling services and business plan writing services.
Related glossary entries
Frequently asked questions
Is CAC the same as cost per lead?
No. Cost per lead divides spending by leads. CAC divides defined acquisition costs by new customers; not every lead becomes a customer.
Should salaries be included in CAC?
A fully costed calculation includes the relevant acquisition share of sales and marketing salaries. Explain allocations and label narrower measures clearly.
What is a good CAC?
It depends on customer contribution, retention, sales cycle and cash availability. There is no universal amount or ratio that suits every business.