Definition · also called customer acquisition cost, cost per acquisition
CAC (customer acquisition cost) is everything you spend to win new customers in a period divided by the number of new paying customers you won in that period.
Founders usually look at two versions: paid CAC (ad spend ÷ customers from ads) and blended CAC (all sales and marketing cost ÷ all new customers, organic included). Blended looks better; paid tells you whether ads actually work.
CAC formula
CAC = total sales & marketing cost ÷ new paying customers (same period)
- Include: ads, sponsorships, affiliate payouts, marketing tools, freelancers, launch-platform fees, salaries of people doing sales and marketing.
- Exclude: hosting and product costs (those belong in gross margin).
- CAC payback (months) = CAC ÷ (ARPU × gross margin).
Worked example
Last month you spent $800 on ads, $200 on an SEO tool and $500 on a newsletter sponsorship, and won 25 new paying customers (12 of them from ads).
- Blended CAC = $1,500 ÷ 25 = $60
- Paid CAC = $800 ÷ 12 = $67
At $25 ARPU and 85% gross margin, payback = $60 ÷ $21.25 ≈ 2.8 months.
Your time is CAC too
Indie makers often say their CAC is zero because they grow through Twitter, SEO and launches. The cash cost is zero; the time cost is not. If you spend 40 hours a month on content and get 20 customers, your CAC is two hours per customer. Valuing that time at even $50/hour makes CAC $100, which still matters when you compare channels.
CAC benchmarks
| Benchmark | Value | Source |
|---|---|---|
| CAC payback, best SaaS businesses | 5–7 months | David Skok, For Entrepreneurs |
| LTV:CAC of the best SaaS businesses | higher than 3 | David Skok, For Entrepreneurs |
CAC in practice: how indie makers use it
How makers in the directory kept acquisition cheap, or made paid acquisition work:
Grew Snappa almost entirely through content marketing and SEO, passing $100K MRR in April 2020 with a handful of people. (sources: starterstory.com, sidehustlenation.com)
Uses his YouTube channel Dev as Life, with over 200,000 subscribers, as Inkdrop's main acquisition channel: viral coding-setup videos bring developers to a paid-only app. (source: indiehackers.com)
Did the opposite: picked products specifically to grow with paid ads, using a decade of performance-marketing experience to keep paid CAC below what customers paid. (source: jeannen.com)
Buttondown's early growth came largely from the “powered by Buttondown” footer on customers' newsletters, a product-led channel with no per-customer cost. (source: starterstory.com)
Free calculators
Frequently asked questions
How do you calculate customer acquisition cost?
Divide all sales and marketing spend in a period by the number of new paying customers acquired in that period. Use the same time window for both numbers.
What is the difference between blended and paid CAC?
Blended CAC divides all acquisition spend by all new customers, including organic ones. Paid CAC divides ad spend only by customers that came from ads, which shows whether ads pay off.
What is a good CAC?
CAC is good when it is well below customer lifetime value (3:1 LTV:CAC or better) and paid back within about 12 months from gross profit.
Related terms
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Maker examples are paraphrased from the cited sources and from each maker's IndieMakerList profile; revenue is self-reported unless marked verified. Spotted an error? Tell us.