The formula
CAC = sales and marketing spend ÷ new customers won in the same period.
How to use it
- Use the same period for spend and customers. For long cycles, shift spend back by one cycle.
- Include people costs, not only ad spend.
- A common rule of thumb is an LTV to CAC ratio of 3 or more, but check it against your payback time too.
Frequently asked questions
What is CAC payback?
The months it takes for a customer's gross profit to repay what you spent to win them. Divide CAC by monthly gross profit per customer.
Should CAC include free trial users?
Count customers who paid. Trials that never convert are part of your cost, not a separate count.