Customer Acquisition Cost (CAC): The One Number Every Business Owner Must Master
If cash seems to leak faster than it arrives, there’s usually one culprit: you don’t know your customer acquisition cost. In the 3-minute video below I show—story style—how tracking CAC turned a dusty photo studio into a £50 million empire.
Why Customer Acquisition Cost Matters to Growth-Minded CEOs
CAC = blended marketing spend ÷ new customers. Lower it and you unlock free cash-flow for hiring, R&D, or paid ads that bury competitors. Ignore it and you burn pounds on campaigns that “look good” but quietly drain profit.
- Pricing Power & Margins — Know CAC → price with confidence.
- Budget Allocation — Shift spend to channels with the healthiest CAC.
- Investor Appeal — A solid LTV : CAC ratio (3 : 1 or higher) screams scalability.
The Ridiculously Simple CAC Formula
Baseline Equation
CAC = Total Sales & Marketing Spend ÷ Number of New Customers
What to Include in “Spend”
- Ad spend (Google, Meta, YouTube, etc.)
- People costs (salaries, commissions, freelancers)
- Tools & software (email, CRM, design)
- Other costs (events, swag, coffee bribes)
- – Returns/Cancels (subtract to keep it real)
Plug those numbers into the calculator below and you’ll see your blended CAC plus the pay-back ratio (gross profit per customer ÷ CAC).
Advanced CAC: Channel Breakdowns & Pay-Back Ratio
Serious operators track CAC per channel—Facebook Ads, Google Ads, LinkedIn, outbound calls—so they can scale the winners and nuke the losers. They also watch how many days of profit it takes to recover that spend.
| Metric | Good | Great |
|---|---|---|
| LTV : CAC | ≥ 3 : 1 | ≥ 5 : 1 |
| Pay-Back Period | < 12 months | < 6 months |
Free LPV Advanced CAC Calculator (Interactive)
Use the fields below to instantly see your blended CAC, pay-back ratio, and per-channel CAC. Default rows for Google Ads and Facebook Ads are already loaded—tweak or remove as you wish.
LPV Advanced CAC Calculator
Blended CAC
Channel Breakdown (optional)
What to Do After You Know Your CAC
1 — Compare Against Lifetime Value (LTV)
If LTV ÷ CAC is under 3 : 1, either raise prices, add upsells, or cut acquisition costs.
2 — Optimise Your Winning Channels
- Double budgets on channels with lowest CAC.
- Kill or pause channels above your target.
3 — Test Offers to Lift Conversion Rate
Tighter offers and stronger guarantees often drop CAC by 30-50 %.
Frequently Asked Questions
Is CAC different from CPA?
CPA (Cost per Acquisition) is ad-platform only; CAC is all-in marketing & sales cost.
How often should I check CAC?
Monthly for most SMBs; weekly if you spend > £10 k/month on ads.
What’s a “good” CAC?
Industry-specific, but if pay-back is under 12 months, you’re in the safe zone.
Ready to Slash Your CAC & 4× Your Profit?
If you’re a £3 – £50 million company that wants predictable growth, apply for a private strategy call. LPV handles the heavy lifting—strategy and execution—so you scale smarter, not harder.
