Sellevate

Profit & margins

Customer acquisition cost and CAC payback

Customer acquisition cost (CAC) is the average amount you spend to win one new customer. You calculate it by dividing your acquisition spend by the number of new customers in the same period. CAC payback then tells you how long a customer takes to earn that cost back in gross profit.

The customer acquisition cost (CAC) formula

Formula

CAC = Acquisition spend ÷ New customers acquired

Acquisition spend
what you spent to win new customers in the period
New customers acquired
first-time buyers in the same period

Count only new customers. Including repeat buyers makes CAC look lower than it really is.

Blended vs paid CAC

The answer depends on what you count:

Worked example: one monthExample numbers

InputValue
Paid ad spend$12,000
New customers attributed to ads300
Total marketing spend (ads, influencers, affiliates)$18,000
All new customers, from every channel500
  1. Paid CAC = $12,000 ÷ 300 = $40
  2. Blended CAC = $18,000 ÷ 500 = $36

When paid CAC rises but blended CAC holds steady, your organic channels are carrying more of the load. When both rise, acquisition is getting more expensive overall.

CAC payback period

CAC on its own doesn't tell you whether a customer is worth it. Payback does.

CAC payback

CAC payback (months) = CAC ÷ Monthly gross profit per customer Orders to pay back = CAC ÷ (AOV × Gross margin)

Continuing the example, with a paid CAC of $40, an AOV of $75 and a 45% gross margin:

  1. Gross profit per order = $75 × 45% = $33.75
  2. Orders to pay back = $40 ÷ $33.75 = 1.2 orders
  3. If a typical customer orders 0.4 times a month (about once every 2.5 months), monthly gross profit per customer = $33.75 × 0.4 = $13.50
  4. Payback = $40 ÷ $13.50 = about 3 months
Customer Acquisition Cost Payback CalculatorHow many orders it takes to pay back what you spent acquiring a customer.

The calculator measures payback in orders. Divide by how often customers order to convert it to months.

LTV:CAC

Lifetime value (LTV) is the gross profit a customer brings in over their whole relationship with you. Comparing it with CAC shows the return on acquisition spend:

LTV:CAC

LTV = Gross profit per order × Orders per customer over their lifetime LTV:CAC = LTV ÷ CAC

If customers in the example place 4 orders on average, LTV = 4 × $33.75 = $135, and LTV:CAC = $135 ÷ $40 = 3.4. Each dollar spent acquiring a customer comes back as $3.40 of gross profit over time.

Use LTV carefully: it's a forecast, and it's easy to overestimate for a young store with little repeat-purchase history.

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CAC by channel

Blended CAC hides big differences between channels. Break it down using the same month as the example above:

ChannelSpendNew customersCAC
Google Ads$7,000200$35
Meta ads$5,000100$50
Influencers and affiliates$6,00060$100
Organic, email and referrals$0 direct spend140—
Total$18,000500$36 blended

The paid ad channels together give the $40 paid CAC ($12,000 ÷ 300). Influencers look expensive here, but check whether those customers buy more often or spend more before cutting the channel. CAC is only half the picture; payback is the other half.

Common CAC mistakes

How to lower CAC

FAQ

What costs should I include in CAC?

For paid CAC, the ad spend for the period. For blended CAC, all acquisition spend: ads, influencer and affiliate fees, promotional discounts for first orders, and, if you want the full picture, the cost of the people and tools that run marketing.

What is a good CAC?

One that the customer pays back quickly from gross profit. There's no universal number; a $60 CAC is fine for a store with high AOV and frequent repeat purchases and ruinous for one with a $25 one-off product.

How is CAC different from CPA?

CPA (cost per acquisition) usually counts the ad cost per conversion, including repeat customers. CAC counts only new customers. If many of your ad conversions are existing customers, CAC will be higher than CPA.

What is LTV:CAC?

It compares the gross profit a customer brings in over their lifetime with what it cost to acquire them. A ratio above 1 means customers pay back their acquisition cost; the higher it is, the more room you have to spend on growth.