Customer Acquisition Cost Calculator (CAC Payback)
Calculate customer acquisition cost (CAC) by dividing total sales and marketing spend by the new customers it won, compare blended with paid CAC, and see the payback period in months. It looks at the cost side; customer lifetime value shows what a customer is worth over time.
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Formula
Blended CAC = total sales and marketing spend / new customersPaid CAC = paid advertising spend / customers won from paid channelsPayback months = blended CAC / (monthly revenue per customer x gross margin)
Use the same period for spend and customers. Costs that do not map to a period (long sales cycles) should be lagged by hand.
Worked example
Spend 20,000 (12,000 on ads), 100 new customers (40 from ads), 50 a month per customer at a 60% margin.
- Blended CAC = 20,000 / 100 = 200
- Paid CAC = 12,000 / 40 = 300
- Monthly gross profit per customer = 50 x 0.60 = 30, so payback = 200 / 30 = 6.7 months
Another example
Spend 45,000 (20,000 on ads), 150 new customers (50 from ads), 40 a month per customer at a 50% margin.
- Blended CAC: 45,000 / 150 = 300.
- Paid CAC: 20,000 / 50 = 400.
- Monthly gross profit per customer: 40 x 0.50 = 20, so payback is 300 / 20 = 15 months.
Rules of thumb
A CAC payback under 12 months is a common target for subscription businesses selling to smaller customers, while longer payback can be acceptable for larger contracts with low churn. A CAC to lifetime value ratio of 1:3 or better is another widely quoted guide. Both depend on your cash position.
Common mistakes
- Leaving out salaries, commissions, tools or agency fees.
- Matching spend and customers from different periods when sales cycles are long.
- Quoting blended CAC to justify paid channels, which usually cost more per customer.
How it differs
CAC is cost per new customer. Cost per click is cost per visit, ROAS is revenue per unit of ad spend, and CLV is the value of the customer once won. The payback period calculator is the general version for any investment.
Frequently asked questions
How do you calculate customer acquisition cost?
Divide what you spent on sales and marketing in a period by the new customers won in that period. 20,000 spent to win 100 customers is a CAC of 200.
What is the difference between blended and paid CAC?
Blended CAC uses all spend and all new customers, including organic and referral ones. Paid CAC uses only advertising spend and the customers it brought in: 12,000 for 40 customers is 300, higher than the blended 200.
How is the CAC payback period worked out?
Payback months = CAC / (monthly revenue per customer x gross margin). With a CAC of 200 and 50 x 60% = 30 of monthly gross profit, payback is 200 / 30 = 6.7 months.
Which costs should be included in CAC?
Include everything spent to win customers in the period: ad spend, sales salaries and commissions, tools and agency fees. Leaving costs out makes CAC look better than it is. If you use this to make spending or investment decisions, treat the result as an estimate from the numbers you entered and check it with a qualified adviser.
What is a good CAC payback period?
As a rule of thumb, many subscription businesses aim to recover CAC within about 12 months, and some with large contracts accept 18 to 24. A shorter payback frees cash to reinvest. With a CAC of 300 and 20 of monthly gross profit per customer, payback is 15 months.
How do CAC and customer lifetime value work together?
CAC is what you pay to win a customer and lifetime value is the profit they bring. Dividing the two gives the LTV:CAC ratio; a common rule of thumb is 3 or more. A lifetime value of 700 against a CAC of 200 is a ratio of 3.5.
What is the CAC formula in Excel?
Use =total_sales_and_marketing_spend/new_customers. For 45,000 of spend and 150 new customers, =45000/150 gives 300. For payback in months use =cac/(monthly_revenue*margin), which gives 300 / (40 * 0.5) = 15.