What does a new customer really cost?
Customer acquisition cost measures spending required to win a new customer. Paid CAC divides advertising spend by new paid customers; blended CAC divides all acquisition costs by all new customers. Compare CAC with customer contribution profit over a consistent period.
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The formula, explained.
Paid CAC = advertising spend ÷ new paid customers Blended CAC = all acquisition costs ÷ all new customers LTV:CAC = lifetime value ÷ blended CAC
A worked example
- Choose one month and count only first-time customers acquired during that period. Suppose advertising costs $5,000, agency and creative work cost $800, and acquisition software costs $200. Your ads bring in 100 new customers, while organic and referral channels add 20 more. Total acquisition spending is therefore $6,000 across 120 new customers.
- Calculate paid CAC as $5,000 divided by the 100 customers acquired through paid channels: $50. Then calculate blended CAC as $6,000 divided by all 120 new customers: also $50. The two results happen to match here. Blended CAC is not inherently lower; additional non-ad costs and the number of organic customers determine the relationship.
- If each new customer generates a $100 first order at a 40% contribution margin before acquisition, that order contributes $40 toward the $50 CAC. The remaining $10 must be recovered through future contribution profit. A revenue-based lifetime value of $150 gives a 3:1 LTV:CAC ratio, but does not establish profitability unless the associated product and service costs are included.
How to interpret your result
Compare blended CAC to contribution profit from each new customer. Lifetime value should use a consistent period and ideally contribution profit rather than revenue. Revenue-based LTV can overstate acquisition headroom.
Common mistakes to avoid
Counting repeat customers in the denominator understates CAC. Paid and blended CAC need different customer counts when organic channels bring in customers.
Frequently asked questions
What does a new customer really cost?
With $5,000 in ads, $1,000 in other acquisition costs, 100 paid customers and 120 total new customers, paid CAC is $50 and blended CAC is $50. Compare blended CAC to contribution profit from each new customer. Lifetime value should use a consistent period and ideally contribution profit rather than revenue. Revenue-based LTV can overstate acquisition headroom.
What counts as a good CAC?
There is no universal good number, because CAC only means something next to what a customer is worth. A $50 CAC is fine if contribution profit per customer clears $50 with room to spare, and too high if it does not. Compare blended CAC to your own contribution profit and payback period rather than a benchmark from another business.
What is the difference between paid CAC and blended CAC?
Paid CAC divides advertising spend by new paid customers only, isolating the efficiency of a paid channel. Blended CAC divides all acquisition costs by all new customers, including ones who arrived through organic, referral, or other unpaid channels. The two use different denominators, so they should not be compared to each other directly.
Is there a target LTV:CAC ratio I should aim for?
A commonly cited rule of thumb is 3:1, meaning lifetime value should be about three times blended CAC. Treat this as a rough directional check, not a guaranteed profit threshold. The ratio only holds up if lifetime value is based on contribution profit, not revenue. A revenue-based LTV will make the ratio look healthier than it actually is.
Should salaries count toward CAC?
It depends on whether you want a fully loaded CAC or a channel-cost CAC. If you want salaries included, enter them under other acquisition costs alongside agency and software spend. Whichever choice you make, apply it consistently across periods so CAC trends stay comparable.
Why does counting repeat customers distort CAC?
CAC measures the cost of acquiring new customers, so the denominator should only include customers acquired for the first time in that period. Adding repeat purchasers inflates the customer count without adding new-acquisition spend, which understates CAC and makes acquisition efforts look more efficient than they are.
Can I change the assumptions?
Yes. All inputs can be edited, and advanced assumptions are available below the main inputs. Use values from the same period and currency. Changing display currency changes the symbol, not the underlying amount.
Are my financial numbers saved?
No. Calculations happen locally in your browser. Sharing creates a link containing the inputs, and exporting saves a CSV report to your device. You choose whether to share those artifacts.
Sources & methodology
Learn more about our calculation methodology and estimate limitations.