The CAC formula looks deceptively simple. The real work is in deciding what counts as "acquisition spend" and which customers count as "new." Get those right and the formula gives you a useful number; get them wrong and you have an optimistic figure that quietly hides a margin problem.
The formula
CAC = Total acquisition spend (period) ÷ New customers acquired (same period)
What goes into the numerator
Fully loaded acquisition spend should include:
- Paid ads — Meta, Google, TikTok, partnerships, podcast, OOH.
- Content production — creative, video, photography, copywriting attributable to acquisition.
- Marketing and growth salaries — fully loaded (salary + benefits + payroll tax).
- Marketing software and tools — ad platforms, analytics, attribution, creative tools.
- Agency and contractor fees — paid for acquisition work specifically.
- Affiliate and influencer payouts — when paid for conversions or campaigns.
Things to exclude: post-purchase costs (fulfillment, customer support), retention software, product development, R&D. Those are not acquisition.
What goes into the denominator
The number of new customers acquired in the period. "New" is the operative word — exclude:
- Returning customers placing repeat orders.
- Customers transferred from another business unit.
- Win-back conversions (those are retained, not acquired).
Some teams further segment new customers as paid-attributable vs. organic, which lets you calculate paid CAC and blended CAC separately. See how to calculate customer acquisition cost for the longer walk-through.
The mistakes that distort the formula
- Including organic customers in the denominator with paid spend in the numerator. Deflates CAC artificially.
- Excluding salaries and tools. A two-person growth team is $200K+/year of unbooked acquisition cost.
- Mixing time periods. March spend acquires customers in March and April. For long sales cycles, attribute across the conversion window.
- Confusing CPA with CAC. CPA is a channel-level ad metric (cost per conversion event). CAC is a fully-loaded business metric. They are not the same.
How to use the result
Compare to LTV. Healthy is LTV:CAC ≥ 3:1. At 1:1, you are breakeven on acquisition before any operating cost. At 5:1+, you may be under-investing in growth.