Create Date: July 10, 2024
Last Modified Date: November 26, 2024
CAC is able to be calculated in just a few steps. It requires knowing the cost of marketing, the cost of sales, and the number of new customers. The formula for it is:
It is important that you understand what some terms relating to CAC mean.
Finding your customer acquisition cost can be done very easily with our tool. The steps to using it include:
A business sells drinks online. They spent $500 in marketing expenses in one month. In that same month they had 8 customers who each bought 1 bottle. Each bottle was $2 to make so the cost of sales was $16. To calculate the CAC you add 500 and 16 to get 516 then divide it by 8 to get a CAC of $64.50.
A power washing company got 10 customers last month. Their marketing cost was $350 and their total cost of sales was $150. To calculate their CAC you add 350 and 150 to get 500 then divide it by 10 for a CAC of $50.
Not every business will look at their marketing costs and sales costs to ensure they are profitable and within a healthy range. That makes it important to know your CAC so you manage and actively work on ensuring profitability.
No business's CAC will ever be the same. But in general, a CAC is good when it is less than a third of your customer lifetime value. So if your customer lifetime value is $30, a good CAC is $10 or less.
No, it is impossible for a business to have a negative CAC. It can technically only be as low as zero if you have zero customers despite having money spent on marketing.
