Marketing metrics explained

What is CAC

CAC is customer acquisition cost: everything you spent on sales and marketing in a period, divided by the number of new customers you won in it.

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Spend £6,000 in a month and gain 150 first-time customers, and your CAC is £40.00.

The word "everything" is what separates it from CPA. CPA is one platform's spend over that platform's conversions. CAC takes the ad spend from every channel, adds the fees and salaries of the people doing the work, and divides the lot by new customers. It is the number a founder or finance person means when they ask what a customer costs.

How it's calculated

CAC = total sales and marketing cost ÷ new customers acquired

Both over the same period, and "new" meaning the customer's first ever order. The Google Sheets version, a worked example and the guard against a month with no new customers are on the CAC formula page.

What it tells you, and what it doesn't

CAC tells you the price of growth. Put beside LTV, it tells you whether growth is worth paying for: the LTV to CAC ratio is the figure investors and boards ask for. Put beside the monthly gross margin a customer brings, it tells you how long until a customer pays back what they cost, which is the CAC payback period.

It does not tell you which channel to cut. A single blended CAC hides that brand search might be acquiring customers at £10 while paid social is doing it at £90. It is a company-level figure, and channel decisions need channel-level numbers underneath it. Blended CAC covers when the blended view is the right one.

It also moves slowly and lags. Marketing spent this month may win customers next month. A CAC calculated over a single month can swing on timing alone.

Where it goes wrong

Counting repeat customers as new. If the denominator is all orders, or all customers who bought, CAC comes out far too low. Count only customers whose first ever order fell in the period. An orders export with a customer ID and an order date is enough to work this out.

Leaving costs out. Ad spend alone gives a flattering number. If the campaigns needed an agency, a designer and a tool subscription to exist, those are acquisition costs. A CAC that omits them is a CPA with a grander name.

Mixing the period. Spend from January divided by customers from February is not a CAC. Use the same window for both, and prefer a window long enough (a quarter, say) that timing noise averages out.

Treating platform-reported customers as new customers. Google Ads and Meta Ads report conversions, which include repeat buyers, and both may claim the same person. The new-customer count should come from your order system, where a customer is one row and their first order has a date.

Related metrics

• CAC formula: the calculation with a worked example.
• LTV to CAC ratio: whether a customer is worth what they cost.
• CAC payback period: how many months until a customer has covered their own acquisition.
• Blended CAC: all channels in one figure, and when that is the right view.
• CPA: one platform's cost per conversion, the number CAC is often mistaken for.
• LTV: the other half of the ratio.

Keeping it current

CAC needs two inputs from two places. A scheduled Fresh Sheets report can pull Cost from Google Ads into one tab of your spreadsheet. Its contents are replaced on every refresh, so keep your formulas, and any cost lines you type in by hand (agency fees, salaries), on a separate tab.

Ad spend by heading:

=SUM(INDEX('Google Ads'!A:Z, 0, MATCH("Cost", 'Google Ads'!1:1, 0)))

If you also advertise on Meta Ads, a Meta Ads tab adds its spend the same way, with the heading "Amount spent".

New customers in the period needs a customer against each order, which a Shopify report from Fresh Sheets does not carry (it is orders only, with no customer field). Take Shopify's own orders export instead (Orders, then Export), whose Email column identifies the customer, and paste it into an Orders tab. Source: Shopify Help Centre, Exporting orders. Then a helper column on the formulas tab finds each customer's earliest order date with MINIFS over the export, and a COUNTUNIQUEIFS over the Email column counts those whose earliest date falls inside the month. Add the hand-typed costs to the ad spend, divide by that count, and the figure updates whenever you paste a fresh export.

Work out your CAC with the free calculator