Customer acquisition cost (CAC): the formula and how to tell if your ads pay off
How to calculate customer acquisition cost, which costs to include, and how to compare it with what a customer brings so you know whether marketing makes or loses money.
Most businesses know how much they spend on ads. Far fewer know what one new customer costs them, and even fewer compare that number with what the customer brings. That comparison is the difference between marketing that grows a business and marketing that slowly drains it.
The formula
Customer acquisition cost (CAC) = everything you spent to win new customers ÷ the number of new customers you won.
Example: in one month you spend 2,000 € on ads and 1,000 € on the agency or freelancer who runs them. You win 60 new customers. Your CAC is 3,000 € ÷ 60 = 50 €.
What belongs in the cost
- Ad spend on every platform: Google Ads, Meta, TikTok, LinkedIn.
- People and services: the agency fee, the freelancer, the part of your own team’s time spent on acquisition.
- Tools you pay for only because of acquisition.
- Discounts for first orders, if you use them to win customers.
If you only divide ad spend by customers, you get a number that looks better than reality. That is fine for comparing campaigns with each other, but not for deciding whether the business makes money.
Count only new customers
A returning customer who clicks an ad is not a new customer. If your shop cannot tell new from returning buyers, CAC will look lower than it is. Most e-shop platforms can mark first orders; use that.
Compare CAC with what a customer brings
CAC on its own says nothing. 50 € is expensive for a customer who buys once for 30 €, and cheap for one who buys every month for two years.
What you need next to it is the profit a customer brings over time, not revenue:
- Average order value.
- Minus the cost of goods, shipping, payment fees and returns. What is left is your gross profit per order.
- Multiplied by how many times a typical customer orders.
Example: an order of 40 € leaves 16 € of gross profit, and a customer orders three times on average. The customer brings 48 €. With a CAC of 50 €, every new customer loses 2 €, even though the ads “look profitable” in the ad account.
Why the ad account can mislead you
Ad platforms report the value of purchases they attribute to themselves. That is revenue, not profit, and the same purchase is often claimed by Google and Meta at once. Use the platforms to compare campaigns, and use your own shop data to decide whether marketing pays.
CAC per channel
Calculate CAC for each channel separately: Google search, shopping ads, Meta, remarketing. The blended number hides channels that lose money behind channels that earn it. Often one channel pays for everything and another quietly burns budget.
A simple monthly routine
- Export new customers per channel from your shop or CRM.
- Add up costs per channel, including fees.
- Divide, and write the numbers into the same table every month.
- Put the profit per customer next to it.
After three months you will see the trend, and decisions about budgets become much easier.
When CAC is too high
You have three levers: pay less for the same customers (better targeting, fewer wasted clicks, better ads), convert more of the people you already pay for (landing page, checkout, offer), or make each customer worth more (repeat purchases, bigger orders). Most businesses only pull the first lever. The other two are often cheaper.
If you want us to calculate this for your business, that is the first step of our growth audit.
Want us to look at your numbers? Growth audit
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