Customer Acquisition Cost (CAC): How to Calculate It, What Is Good, and How to Lower It
Short answer
Customer acquisition cost (CAC) is the total you spend on sales and marketing in a period divided by the number of new customers you won in that period. If you spent 30,000 and won 100 customers, your CAC is 300. It only means something next to customer lifetime value (LTV): a common rule of thumb is that LTV should be at least about three times CAC for healthy growth.
Key takeaways
- ✓CAC = sales and marketing spend ÷ new customers.
- ✓Include ad spend, agency and tool costs, and relevant salaries.
- ✓Compare CAC with lifetime value, not with competitors.
- ✓Lower CAC by improving conversion and retention, not only cheaper ads.
How to calculate CAC
| Input | Example |
|---|---|
| Ad spend | 20,000 |
| Agency and tools | 6,000 |
| Share of sales and marketing salaries | 4,000 |
| Total | 30,000 |
| New customers | 100 |
| CAC | 300 |
What is a good CAC?
There is no universal good number. A CAC of 300 is excellent if customers spend 2,000 over their lifetime and poor if they spend 250 once. Calculate lifetime value from average order value, purchase frequency and how long customers stay, then compare.
7 ways to lower CAC
- Improve landing page conversion.
- Sharpen ad creative around real customer problems.
- Target existing audiences and lookalikes of best customers.
- Raise average order value with bundles.
- Use referrals and reviews.
- Follow up leads faster.
- Retain customers longer so each acquisition is worth more.
Related reading: how to lower cost per lead on Meta ads and customer retention strategies.
Frequently asked questions
What should be included in CAC?+
All sales and marketing costs for the period: ad spend, agency fees, tools and the relevant share of salaries.
What is a good LTV to CAC ratio?+
Around 3 to 1 is a common benchmark, though it varies by business model and growth stage.
Is CAC the same as cost per lead?+
No. Cost per lead measures contacts; CAC measures paying customers.
Team Husbar
Husbar Editorial
Team Husbar is the strategy, psychology and research team at Husbar, a psychology-led growth agency headquartered in Dubai. Together we have worked with 100+ brands over 10+ years.
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