The formula
How to calculate customer acquisition cost
Customer acquisition cost is the total spent on winning a customer, divided by the number won. It is only meaningful next to what a customer is worth and how long the spend takes to come back.
Include the full cost of acquisition: advertising, content, events, sales salaries, commission and the tools they use. Excluding sales salaries is the most common way CAC gets understated.
The calculator asks for:
- Marketing spend
- Sales costs — salaries, commission and tools for the people who close deals
- New customers won
- Gross margin per customer per month
The result updates on every keystroke. The URL updates too, which makes the filled-in version easy to bookmark or send to someone else.
Some of the fields above will accept figures that seem unusual for your own situation, and that is deliberate: the formula behind customer acquisition cost works the same way regardless of scale, so the calculator does not stop you testing a hypothetical scenario a long way from your actual numbers — often the fastest way to see which input the result is most sensitive to.
Why customer acquisition cost matters
A calculation like this usually gets used at a decision point rather than out of curiosity — comparing two real options, checking a number a lender or adviser has quoted, or working out whether a plan that sounded fine in conversation still holds up once it is written down with actual figures. The maths itself is rarely complicated; what is hard is remembering which figures to use and in what order, which is exactly what a dedicated calculator is for.
This tends to come up when comparing two concrete alternatives — two lenders, two savings products, two ways of structuring the same decision — rather than in the abstract. Run both scenarios through the same calculator with the same assumptions and the comparison becomes fair, because the only thing changing between the two results is the number you are actually trying to test.
It is also worth being clear about what a single figure like this can and cannot settle on its own. It answers the specific question the formula was built to answer, and nothing more — a favourable customer acquisition cost result does not automatically mean a decision is a good one overall, since plenty of other factors that a formula cannot capture, from personal circumstances to how comfortable a commitment feels, usually matter just as much as the arithmetic. Use the number as one solid input among several rather than the whole of the decision.
Where the same calculation needs to be run for several different scenarios side by side — three loan offers, two savings plans — the fastest approach is usually to open the calculator in a second browser tab for each one, so that the results can be compared directly rather than overwriting each other in a single set of fields.
Worked example
Take the figures the calculator starts with:
- Marketing spend: 48,000
- Sales costs: 62,000
- New customers won: 220
- Gross margin per customer per month: 65
That gives:
- Customer acquisition cost: 500
- Payback period: 7.69 months
- Total acquisition spend: 110,000
These figures are only the calculator's own starting values, included so the working is visible rather than hidden inside the tool above. Replace them with your own numbers and the same arithmetic applies — nothing about the method changes, only the inputs feeding it.
Reading the result
Payback matters more than the raw figure. Under twelve months is generally considered healthy for a subscription business, because the spend is recovered before churn has had time to bite.
Where this goes wrong. Attributing all new customers to paid activity. Organic, referral and word-of-mouth customers dilute the average and make paid channels look more efficient than they are — calculate paid CAC separately.
A useful check on any unfamiliar result is to compare it against a rough mental estimate first — round the inputs to convenient numbers and see whether the calculator's answer lands in roughly the same territory. A wildly different figure usually means one of the fields was entered in the wrong unit, most often a percentage typed as a whole number where a decimal was expected, or the reverse.
There is no absolute figure — it only means something against lifetime value. A CAC of £500 is excellent if customers are worth £3,000 and fatal if they are worth £600.
No. Account management, support and retention spend serve existing customers and belong in cost of service. Mixing them in makes acquisition look more expensive than it is.
The answer it gives you is customer acquisition cost. With 48,000 marketing spend, 62,000 sales costs and 220 new customers won, that comes to 500. Change any field and the figure moves with it.
Whenever one of the underlying figures changes — a new interest rate, a different balance, an updated term — since the result only reflects what is currently in the fields. There is no need to keep a separate record of past results; the web address for a filled-in version already carries the figures used to produce it.
Not unless a tax rate or a fee is explicitly one of the inputs above. Where it is not, the figure shown is a gross calculation, and any tax due depends on your personal circumstances and current tax rules, which are worth checking separately.
The arithmetic itself is exact — the calculator applies the formula shown above precisely, with no rounding until the final figure is displayed. The uncertainty, where it exists, is entirely in the inputs: an estimated rate or an approximate balance carries that same approximation through to the result.