What is Customer acquisition cost (CAC)?

The formula

CAC = (marketing spend + sales cost) ÷ new customers acquired

Include the parts people leave out: agency and freelance fees, tooling, content production, and the fully loaded cost of anyone whose job is acquisition. Excluding them produces a flattering number you cannot act on.

Blended CAC versus channel CAC

Blended CAC divides everything by everyone. It is honest about the whole business and useless for deciding anything, because it averages your best channel and your worst into one figure.

Channel CAC divides each channel’s spend by the customers that channel produced. This is where the decisions live — and it requires revenue attribution, because you need to know which channel a customer came from before you can charge them to it.

The usual finding, once a business looks: one channel is subsidising another. Blended CAC of $60 might be organic search at $8 and paid social at $210, and only the split version tells you to stop.

The organic problem

Content and SEO have real costs and delayed, hard-to-attribute returns. A post published in March may still be winning customers in November. Two defensible approaches:

• Amortise content cost across the period it keeps working, rather than charging it all to the month it shipped.
• Report organic CAC separately and label the horizon, instead of blending a long-payback channel with a same-day one.

Either is fine. Mixing them, or silently changing between them, is not.

Payback period

CAC divided by monthly gross profit per customer gives the payback period — how long until a customer has repaid what they cost. Under 12 months is generally considered healthy for self-serve software. It matters more than the LTV ratio when cash is finite, because a 3:1 ratio with a 30-month payback can still put you out of business.