CAC Calculator | Customer Acquisition Cost formula

Customer Acquisition Cost (CAC) is how much you pay to acquire a new customer for your ecommerce or online business.

Understanding this cost is CRITICAL for success, especially if you want to scale your ecommerce.

Customer Acquisition Cost (CAC) Calculator

Over the past 20 years, I have worked with countless ecommerce owners, fine-tuning a method to accurately calculate Customer Acquisition Cost (CAC).

With the introduction of tools like Google Analytics 4 (GA4), tracking customer acquisition data has become more complex, but not impossible.

Through years of refining this formula, I have developed a precise and actionable way to calculate CAC, one that’s easily translated to almost any industry.

I could complicate the formula by separating fixed and variable costs, but trust me, it’s not important.

Why? This is because you’re not an accountant – you’re a business owner or a marketer, so what matters most to you is how much you’re paying to get a new customer, without getting bogged down in financial details.

Customer Acquisition Cost (CAC) Formula

As I mentioned, this is my formula, improved constantly since the first time I used it, in 2004:

You can use it to calculate your last 12 months CAC, but I don’t recommend it: with the accelerated  evolution of AI, customer acquisition and competitors are changing SO FAST that a 12 month CAC is obsolete.

Just use the average last 90 days CAC or the average last 6 months CAC instead.

Frequently Asked Questions About Customer Acquisition Cost

What is CAC or Customer Acquisition Cost?

Customer Acquisition Cost (CAC) is how much you pay to acquire a new customer for your ecommerce or online business.
It’s one of the most important metrics for ecommerces that want to scale.
The comparison between your CAC and your CLV (Customer Lifetime Value), your GP (Gross Profit) and AOV (Average Order Value) will dictate if you are able to scale your online business or NOT.
If your business is not scalable, then schedule a call with us for a Free Ecommerce Audit in which you will analyze each channel, your CLV, your GPPC, your AOV, and every aspect of your ecommerce to find where and how to improve.

What is a good CAC rate?

Every ecommerce has its own CAC, but there are some markers that will show if it’s good or not.
When I say “good CAC”, I mean one that allows your ecommerce to grow or scale.
In other words, your business can be profitable while also having a terrible CAC… but don’t plan to scale!
These are the three main CAC comparisons that can help you:

1. CAC:CLV ratio
This is the most important.
CAC:CLV ratio = CLV / CAC
Remember to compare apples with apples… if you’ve calculated your CAC for the last 90 days, you can use our free CLV calculator to calculate your last 90 days CLV.
A good CAC:CLV ratio = 3
An excellent CAC:CLV ratio = more than 4
If you have 4 or more, then you are all set to scale… at least numbers-wise 🙂

2. GPPC:CAC ratio
GPPC is your Gross Profit per Customer, and it’s important because it will tell you how much margin you have to cover CAC, overhead, and other expenses.
Here is the formula;
Gross Profit per Customer = Average Revenue per Customer − Average Cost of Products Sold per Customer (CPSC)
Your Average Revenue per Customer is the average revenue generated from each customer over a specific period (as always, I suggest last 90 days).
Your Average CPSC is the average direct costs associated with delivering your product or service to each customer (production costs, packaging costs, delivery/shipping costs, and any additional direct costs).
A good GPPC:CAC ratio is between 33% and 25%.
An excellent GPPC:CAC ratio that will allow you to scale is less than 25%.

3. AOV-CPSC:CAC ratio
Ideally, your CAC should be covered on a first purchase, right? If not, you depend on customer retention in order to “pay” for their acquisition cost.
AOV to CAC Ratio = (Average Order Value (AOV) – Average Cost of Products Sold per Customer (CPSC) ) / Customer Acquisition Cost (CAC)
A good ​AOV-CPSC:CAC ratio is 1, which means that the customer’s first purchase “covered” your CAC.
An excellent AOV-CPSC:CAC ratio, on the other hand, is more than 1. If this calculation gives you a ratio over 1, you are ready to scale.

How do you calculate simple CAC?

To calculate Customer Acquisition Cost (CAC) easily, divide your website cost by the total number of new customers gained during the same period. The formula is:

CAC = Total Website Cost  / Number of New Customers

For example, if you spent $10,000 on your website last year (hosting, ads, software, etc.) and gained 100 new customers, your CAC would be $100.

Does CAC include salaries?

Yes, CAC must include salaries, specifically for employees directly involved in customer acquisition: such as marketing and sales teams, and everybody related with the website.

This ensures a more accurate representation of the total costs associated with acquiring new customers.

What is the formula for CAC for startups?

It’s the same formula.

You can always use the simple formula I described above, but if you want to know your CAC accurately, you should use the formula at the beginning of this post.

If you have any questions about Customer Acquisition Cost calculations, or if you have a better formula, let’s chat!

Leave a comment below and I’ll get back to you 🙂