Customer acquisition cost (CAC) is the total sales and marketing spend in a period divided by the number of new customers won in that period. Include ad spend, sales and marketing salaries, tools, agency fees and free-trial costs. If you spend $30,000 in a quarter and win 60 customers, your CAC is $500.
Key takeaways
- CAC = total sales and marketing cost ÷ new customers acquired in the same period.
- Fully loaded CAC includes salaries, tools and agencies, not just ads.
- Never judge CAC alone. Compare it with lifetime value and payback time.
- The cheapest CAC comes from referrals, community and word of mouth, which is the Marketing Supremacy part of the MOATS framework.
Manuel Suarez runs a digital marketing agency called Attention Grabbing Media.
When I wrote about him in The Subscription Playbook, his business was bringing in about $200,000 a month in recurring revenue. And he was spending barely anything to win new clients.
How?
He used Facebook Messenger, which is free, to turn the people already reading his content into conversations. A few simple questions (What's your revenue? Do you have a YouTube channel? How many staff?) told him who was worth talking to. No big ad budget. No army of salespeople.
That's what a low customer acquisition cost looks like. And in the MOATS framework, it's the first letter: M for Marketing Supremacy. A business that can win customers cheaply is harder to copy and far more attractive to a buyer.
So, what does it actually cost you to win a customer? Most owners don't know. Let's fix that.
What is customer acquisition cost?
Customer acquisition cost (CAC) is the total amount you spend on sales and marketing to win one new paying customer.
In the book's land and expand chapter I put it simply: what are your sales and marketing costs to acquire a new customer? Then tie that number to your customer lifetime value. The rule I gave was that CAC should be a third or less of LTV.
But you can't compare the two until you've calculated CAC honestly.
How do you calculate CAC?
CAC = Total sales and marketing cost in a period ÷ New customers acquired in that period
"Total" is where people cheat. A fully loaded CAC includes:
- Advertising spend (Meta, Google, LinkedIn, TikTok, sponsorships)
- Salaries, commissions and on-costs for sales and marketing staff
- Agency, freelancer and creator fees
- Marketing software (CRM, email, landing pages, analytics)
- Referral rewards and sign-up discounts
- Events, webinars and trade shows
- The cost of serving free trials or a free plan, if it exists to win paying customers
Leave out the cost of serving existing customers. That belongs in customer success or cost of revenue.
Worked example: a B2B software company
In one quarter, a small SaaS company spends:
- $12,000 on paid ads
- $15,000 on the share of salaries spent on sales and marketing
- $3,000 on tools and a freelance designer
That's $30,000. It wins 60 new customers.
- Fully loaded CAC: $30,000 ÷ 60 = $500
- Ads-only CAC: $12,000 ÷ 60 = $200
The founder had been telling investors CAC was $200. The real number is two and a half times that.
How should a gym or cafe calculate CAC?
The same way, just with smaller numbers.
Worked example: a gym's January campaign (illustrative)
A gym runs a new-year campaign:
- A$5,000 on Meta and Google ads
- A$2,000 of front-desk and sales staff time spent on tours and follow-ups
- A$1,000 in direct costs for a free first week (towels, cleaning, trainer time)
Total: A$8,000. It signs 40 new members.
CAC: A$8,000 ÷ 40 = A$200 per member.
If the gym's lifetime value per member is around A$1,125 (see the LTV worked example), that's comfortably under a third. The campaign worked.
For a cafe coffee club, CAC is often close to zero for members recruited at the counter. The cost is the barista's 20 seconds and a sign by the till. That's your cheapest channel by far, so don't let a shiny Instagram campaign distract you from it. If you're building one, the cafe subscription guide has the full playbook.
LTV:CAC and Payback CalculatorLTV:CAC ratio and CAC payback in months.Open the free tool →What is a good customer acquisition cost?
There's no good CAC in dollars. There's only a good CAC relative to what a customer is worth and how fast they pay it back. Still, the 2026 data gives you some useful reference points.
| Benchmark | Figure | Source (year) |
|---|---|---|
| Blended CAC ratio (S&M spend per $1 of new ARR) | $1.30 median | Aleph and Benchmarkit, 2025 data |
| New-customer CAC ratio | $1.63 median | Aleph and Benchmarkit, 2025 data |
| Median CAC payback | 16 months | Aleph and Benchmarkit, 2025 data |
| Median selling cost, % of ARR | 15% | SaaS Capital, 2026 survey |
| Median marketing cost, % of ARR | 8% | SaaS Capital, 2026 survey |
The CAC ratio is a handy way to compare yourself with others of different sizes:
CAC ratio = Sales and marketing spend ÷ New ARR added
If you spent $130,000 on sales and marketing and added $100,000 of new annual recurring revenue, you're at the median $1.30.
SaaS Capital's survey of more than 1,000 private B2B SaaS companies also shows how funding changes behavior. Equity-backed companies spend 70% more on sales and 100% more on marketing than bootstrapped ones. Bootstrapped companies spend less, grow a little slower (20% versus 25% median growth) and are far more likely to be profitable.
Check your CAC against your LTV
The free LTV:CAC and Payback Calculator shows whether your acquisition spend is paying off.
Why is my CAC so high?
When CAC is out of control, it's almost always one of these.
You're buying attention instead of earning it
Paid ads get more expensive as you scale, because you run out of the easiest audience first. In my first book, Feed a Starving Crowd, I shared 227 free or low-cost marketing strategies for exactly this reason. Chapter 8 of The Subscription Playbook adds four for subscription businesses: community marketing, webinars, referral programs and embedded integrations. The shoestring growth guide walks through each.
Your funnel leaks
If 1,000 people visit your pricing page and 5 buy, your ad spend is fine and your page is the problem. Fix conversion first. It's the cheapest CAC cut you'll ever make.
You're targeting everyone
The book is blunt on this: understanding exactly who your customer is lowers your spend, because you stop paying to reach people who'd never buy.
You're obsessed with new customers
Columbia House, the "12 CDs for a penny" club, leaned so hard on acquisition that it neglected the members it already had. The Columbia House case study shows how that ended. A business with high churn needs more and more new customers just to stand still, and CAC climbs with every one.
What are the most common CAC mistakes?
- Counting only ad spend. Salaries are usually the biggest cost in B2B sales.
- Counting upgrades as new customers. Expansion revenue from existing customers isn't acquisition. Track it separately as expansion revenue.
- Ignoring the time lag. Spend in March might win customers in May. Aleph and Benchmarkit say mistiming spend is the most common way payback gets reported too low. Use a one-quarter lag if your sales cycle is long.
- Averaging channels together. An A$40 referral customer and a A$400 paid-social customer averaged into A$220 tells you nothing useful.
- Excluding referral rewards and discounts. A free month is a marketing cost, even if no cash leaves your account.
How does CAC fit with the rest of the book?
CAC is one half of the most important equation in subscription economics. The other half is lifetime value, and the two meet in the LTV:CAC ratio and the CAC payback period.
There's a link to usage-based pricing too. In Chapter 4, I suggested pairing usage pricing with a minimum commitment so you "claw back the money you spent acquiring the customer." That's CAC thinking built into your price.
And there's the moat. Low-cost acquisition is the first of the 11 moat factors. A competitor can copy your product. It's much harder to copy a referral program that's been compounding for three years.
What should you do next?
Grab last quarter's numbers and do this:
- Add up every sales and marketing cost, including salaries.
- Count new customers (not upgrades) in the same period.
- Divide. That's your fully loaded CAC.
- Now split it by channel. Which channel is cheapest? Which is most expensive?
Then ask yourself: if I moved 20% of my budget from my most expensive channel to my cheapest, what would happen?
Frequently asked questions
What's the difference between blended CAC and paid CAC?
Blended CAC divides all sales and marketing cost by all new customers, including those who found you through word of mouth or search. Paid CAC divides only paid-channel spend by customers from paid channels. Blended CAC looks lower because organic customers are free. Paid CAC tells you whether your ads work. Track both, and never compare your blended number with someone else's paid number.
Should free-trial or freemium costs count as CAC?
Yes, if the free product exists mainly to win paying customers. The hosting, support and AI costs of serving free users are part of what you pay to acquire the ones who convert. Some companies book them as cost of revenue instead, which flatters CAC and hurts gross margin. Pick one treatment, write it down, and stick with it.
Does CAC include onboarding costs?
Usually not. Onboarding happens after the sale, so most companies count it as a customer success or cost-of-revenue expense. The exception is when onboarding is really part of closing the deal, such as a paid pilot or a setup week before the contract is signed. Whatever you choose, apply it the same way every quarter.
How do I lower CAC without cutting growth?
Shift spend toward channels where customers bring other customers: referral programs, community, partnerships and content that keeps working after you publish it. Then improve conversion at each step of your funnel, because a better landing page or trial lowers CAC without spending a dollar more. Raising prices also improves the CAC ratio, as long as conversion holds.
Is a high CAC always bad?
No. A $5,000 CAC is fine if customers pay $3,000 a year and stay for six years. A $50 CAC is terrible if customers pay $9 a month and leave after three. That's why the 2026 Aleph and Benchmarkit data shows payback rising with deal size. Big customers cost more to win and are usually worth it.
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Robert Coorey, MBA
Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.
Sources
- The Subscription Playbook, Robert Coorey (2022), Chapters 1, 5 and 7
- SaaS Capital, 2026 Spending Benchmarks for Private B2B SaaS Companies (June 2026)
- Aleph and Benchmarkit, CAC payback period benchmarks for SaaS (2026 report, 2025 data)
Facts and prices checked 27 October 2026. Spotted something out of date? Tell us.