Here's the question every startup founder eventually asks:
"How much should I spend to acquire a customer?"
The answer isn't simple.
But this guide will give you everything you need to calculate, benchmark, and optimize your customer acquisition cost (CAC).
What Is Customer Acquisition Cost?
CAC is the total cost of acquiring a new customer.
The Formula:
CAC = (Total Sales & Marketing Spend) / (Number of New Customers)
Include in Spend:
- Advertising costs (Google Ads, Facebook, LinkedIn)
- Content creation (blog, videos, podcasts)
- Sales team salaries and commissions
- Marketing tools and software
- Agency or consultant fees
- Events and conferences
- PR and influencer partnerships
Include in Customers:
- New paying customers (not leads, not free trials)
The CAC Calculation Examples
Example 1: Content Marketing Focus
Monthly Spend:
- Content creation: $3,000
- SEO tools: $200
- Email marketing: $100
- Social media management: $2,000
- Total: $5,300
New Customers: 15
CAC: $5,300 / 15 = $353 per customer
Example 2: Paid Advertising Focus
Monthly Spend:
- Google Ads: $10,000
- Facebook Ads: $5,000
- LinkedIn Ads: $3,000
- Ad management tools: $500
- Total: $18,500
New Customers: 50
CAC: $18,500 / 50 = $370 per customer
Example 3: Sales-Led Growth
Monthly Spend:
- Sales team (2 people): $15,000
- Sales tools (CRM): $500
- LinkedIn Premium: $600
- Travel and events: $2,000
- Total: $18,100
New Customers: 8
CAC: $18,100 / 8 = $2,263 per customer
CAC Benchmarks by Channel
Channel | B2B SaaS | B2C | E-commerce |
|---|---|---|---|
Content Marketing | $100-300 | $50-150 | $30-100 |
Paid Advertising | $200-500 | $50-200 | $40-120 |
SEO | $80-200 | $40-100 | $25-80 |
Social Media | $150-400 | $60-180 | $35-100 |
Email Marketing | $50-150 | $20-80 | $15-60 |
Referral | $30-100 | $20-60 | $15-50 |
Sales-Led | $1,000-3,000 | N/A | N/A |
Events/Conferences | $500-2,000 | $200-800 | N/A |
CAC by Growth Stage
Stage | Typical CAC | Notes |
|---|---|---|
Pre-PMV | $500-2,000 | Learning phase, inefficient |
Early (PMF) | $200-800 | Finding scalable channels |
Growth | $100-400 | Optimized acquisition |
Scale | $80-300 | Economies of scale |
The Golden Metric: LTV:CAC Ratio
CAC alone doesn't tell the full story.
The real question: Is this customer worth what you paid to acquire them?
LTV:CAC Ratio Formula:
LTV:CAC = Customer Lifetime Value / Customer Acquisition Cost
Target Ratio: 3:1 or higher
Example:
- CAC: $200
- LTV: $600
- LTV:CAC: 3:1 ✓
LTV:CAC Interpretation
Ratio | Meaning | Action |
|---|---|---|
1:1 | Break even | Improve unit economics |
2:1 | Good | Optimize for efficiency |
3:1 | Excellent | Scale acquisition |
5:1+ | Potential underspend | Invest more in growth |
How to Calculate Customer Lifetime Value
LTV is the total revenue you expect from a customer.
Simple LTV Formula:
LTV = Average Monthly Revenue per Customer × Average Customer Lifespan (months)
Example:
- Average monthly payment: $100
- Average customer stays: 18 months
- LTV: $100 × 18 = $1,800
Advanced LTV Formula (With Churn)
LTV = Average Revenue per User (ARPU) / Monthly Churn Rate
Example:
- ARPU: $100/month
- Monthly churn: 5%
- LTV: $100 / 0.05 = $2,000
CAC Payback Period
How long until you recoup your acquisition cost?
Formula:
CAC Payback (months) = CAC / (Monthly Revenue per Customer × Gross Margin %)
Example:
- CAC: $200
- Monthly revenue: $100
- Gross margin: 80%
- Payback: $200 / ($100 × 0.80) = 2.5 months
CAC Payback Benchmarks
Business Model | Target Payback |
|---|---|
B2B SaaS | 12-18 months |
B2C SaaS | 6-12 months |
E-commerce | 1-3 months |
Marketplace | 3-6 months |
How to Reduce CAC
Strategy 1: Improve Conversion Rates
Funnel Optimization:
Awareness → Interest → Consideration → Conversion
Optimize Each Stage:
- Awareness: Better targeting, clearer messaging
- Interest: Compelling content, social proof
- Consideration: Free trials, demos, comparisons
- Conversion: Simplified checkout, trust signals
Strategy 2: Focus on Organic Channels
Organic vs Paid CAC:
Channel | CAC | Time to Results |
|---|---|---|
Paid Ads | $200-500 | Immediate |
SEO | $50-150 | 6-12 months |
Content Marketing | $30-100 | 3-9 months |
Referral | $20-60 | Ongoing |
Viral | $10-30 | Unpredictable |
Strategy: Invest in organic channels early, scale paid later.
Strategy 3: Improve Targeting
TargetICP (Ideal Customer Profile):
- Lookalike audiences
- Firmographic targeting
- Behavioral targeting
- Intent data
Result: Higher conversion rates, lower CAC
Strategy 4: Reduce Friction
Remove Barriers:
- No credit card required for trial
- Simplified signup (fewer fields)
- Social login options
- Clear pricing (no hidden costs)
- Fast page load times
Strategy 5: Leverage Content
Content That Converts:
- How-to guides
- Case studies
- Comparison content
- Free tools/templates
- Webinars and courses
Benefits:
- Lower CAC than paid
- Builds trust and authority
- Compounds over time
Strategy 6: Implement Referral Program
Referral Economics:
- Cost: 10-20% discount or credit
- CAC: $20-60 (much lower than paid!)
- Bonus: Referred customers have higher LTV
Example Programs:
- Dropbox: Extra storage for both parties
- Uber: Free rides for both parties
- Slack: Paid months for both parties
CAC Optimization Checklist
Measurement
- Track CAC by channel
- Track CAC by cohort
- Track CAC by campaign
- Calculate LTV:CAC ratio
- Monitor CAC payback period
Optimization
- Identify best-performing channels
- Kill or improve underperforming channels
- Improve conversion rates at each funnel stage
- Reduce friction in signup and purchase
- Implement referral program
- Invest in organic channels
- Improve targeting precision
- Test new channels regularly
Common CAC Mistakes
Mistake #1: Ignoring Organic Channels
Wrong: "Paid ads are faster"
Right: Paid CAC increases over time. Organic compounds.
Mistake #2: Not Tracking by Channel
Wrong: "Our overall CAC is $200"
Right: "Content CAC is $80, Paid Ads CAC is $350, Referral CAC is $40"
Mistake #3: Calculating CAC Incorrectly
Wrong: Including all employees in sales & marketing
Right: Only include costs directly related to acquisition
Mistake #4: Ignoring LTV
Wrong: "CAC is $500, too high!"
Right: "CAC is $500, LTV is $3,000, LTV:CAC is 6:1, let's scale!"
Mistake #5: Growing Before Ready
Wrong: "Let's double ad spend!"
Right: Ensure LTV:CAC is 3:1 before scaling.
CAC by Business Model
B2B SaaS
Typical CAC: $200-2,000 Typical LTV: $5,000-50,000 Target LTV:CAC: 3:1 or higher
Best Channels:
- Content marketing
- SEO
- Referrals
- Outbound sales
B2C SaaS
Typical CAC: $50-300 Typical LTV: $200-2,000 Target LTV:CAC: 3:1 or higher
Best Channels:
- Paid advertising
- Content marketing
- Social media
- Influencer partnerships
- App store optimization
E-commerce
Typical CAC: $30-150 Typical LTV: $100-500 Target LTV:CAC: 3:1 or higher
Best Channels:
- Paid advertising
- Email marketing
- Social commerce
- Influencer partnerships
- Referral programs
Related Reading
- Marketing Tools Startups Actually Need - Acquisition tools
- Product Launch Strategy - Launch with CAC in mind
- MVP Metrics That Actually Matter - Track the right metrics
Need Help Optimizing Your CAC?
At Startupbricks, we've helped startups calculate, benchmark, and optimize their customer acquisition costs. We know which channels work, how to improve conversion rates, and when to scale.
Let's talk about optimizing your acquisition strategy.