Customer Acquisition Cost Calculator, or CAC, is a metric that tells a business how much it costs to acquire a new customer. It factors in all the sales and marketing expenses involved in converting someone into a paying customer.
CAC = Total Cost of Sales & Marketing / Number of New Customers Acquired
CAC formula in Excel, screenshot by author
Here’s a breakdown of the formula:
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Example chart with customer acquisition cost by month, image by author
1. Define the time period: Choose a specific timeframe, such as a month, quarter, or year, to analyze your customer acquisition costs. Consistency in the timeframe is important for making comparisons over time.
Screenshot from Excel with table data for calculation, image by author
2. Identify Sales & Marketing Costs: Gather data on all expenses incurred for sales and marketing activities during the chosen period. This can include:
3. Calculate total cost: Add up all the sales and marketing expenses you identified for the chosen timeframe.
4. Track new customer acquisition: Determine the total number of new customers acquired during the same timeframe. This could involve new signups, free trial conversions, or paid subscriptions, depending on your business model.
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Let’s say your company spent a total of $10,000 on sales and marketing in a quarter and acquired 50 new customers during that time.
CAC = $10,000 / 50 customers = $200 per customer
Understanding how much it costs to acquire a new customer is crucial for any business. This is where Customer Acquisition Cost (CAC) comes in. It’s a simple calculation that reveals a wealth of information, empowering you to: