How to Calculate Customer Acquisition Cost (CAC) Step by Step

For SaaS founders, few numbers matter more than Customer Acquisition Cost (CAC). It shows exactly how much you spend to gain a new customer — and whether your sales and marketing engine is efficient.

High CAC means you’re overspending to grow, making it harder to scale or raise capital. A well-managed CAC, paired with healthy retention, shows investors and your team that you can grow sustainably.

In this guide, we’ll walk through the CAC formula step by step, with examples and tips on how to interpret your results, pair them with metrics like LTV and payback period, and optimize your acquisition strategy for long-term success.

Why CAC Matters for SaaS Companies

Knowing your Customer Acquisition Cost (CAC) is critical for any SaaS founder. It answers one simple question: how much does it cost to bring in a new customer?

Get it wrong, and you risk burning through cash without sustainable growth. Get it right, and you’ll scale efficiently, improve your LTV:CAC ratio, and have stronger conversations with investors.

👉 Want to run the math instantly? Use the Customer Acquisition Cost Calculator to see your CAC today.


Step 1: Choose a Time Period

Decide whether you want to calculate CAC monthly, quarterly, or annually. Consistency is key — make sure both your cost data and customer count cover the same period.


Step 2: Add Up All Sales and Marketing Costs

CAC isn’t just ad spend. A fully loaded CAC should include:

  • Paid ads (Google, LinkedIn, Meta)
  • Content creation and campaigns
  • Marketing and sales software
  • Salaries and commissions for the sales and marketing team
  • Agency or contractor fees
  • Events and conferences (amortized if they span multiple months)

💡 Exclude costs like R&D or customer support — those aren’t directly tied to new customer acquisition.


Step 3: Count New Paying Customers

Only include new customers who converted to paid plans during the same time period. Trial users or free accounts don’t count until they generate revenue.


Step 4: Apply the CAC Formula

Here’s the standard formula:

CAC = Total Sales & Marketing Costs ÷ Number of New Customers

Example:

  • $120,000 in sales and marketing spend in Q1
  • 300 new paying customers
  • CAC = $120,000 ÷ 300 = $400 per customer

👉 Test this with the Lead-to-Customer Conversion Calculator to see how different conversion rates affect CAC.


Step 5: Validate with LTV and Payback Period

CAC alone doesn’t tell the whole story. Pair it with two critical metrics:

  • LTV (Lifetime Value): A healthy SaaS business targets LTV:CAC ≥ 3:1.
  • CAC Payback Period: The time it takes to recover acquisition spend. Shorter payback means faster scaling.

👉 Use the CAC Payback Calculator to measure how quickly your acquisition costs are recouped.


Step 6: Analyze and Optimize

Once you know your CAC, break it down further:

  • Compare channel-level CAC (ads vs organic vs outbound).
  • Identify high-cost, low-conversion channels to reduce spend.
  • Double down on campaigns that deliver strong ROI.

👉 Run scenarios with the SaaS Runway Extension Calculator to see how lowering CAC extends your cash runway.


FAQs: Customer Acquisition Cost (CAC)

What should be included in CAC?
All sales and marketing expenses tied to acquiring new customers, including salaries, ads, and tools.

What’s a good CAC for SaaS?
It varies, but many SaaS businesses aim for CAC that’s 20–30% of LTV.

How often should I calculate CAC?
Quarterly is common, though high-growth startups may track monthly.

Should CAC be blended or segmented?
Both matter — blended shows overall efficiency, segmented CAC reveals which channels perform best.

Why is CAC so important for fundraising?
Investors use it to judge efficiency, growth potential, and how quickly you can scale.

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