What is Customer Acquisition Cost (CAC)?

Your startup just closed a $50,000 seed round. You put $10,000 into ads and land 20 customers. Sounds great, right?

But if each one only pays $200 over their lifetime, you’ve just spent more acquiring them than they’re worth. That’s the customer acquisition cost problem every founder runs into at some point.

This guide breaks down customer acquisition cost (CAC) from first principles. You’ll learn what it means, how to calculate it, and how to actually use it to shape your strategy. We’ll cover formulas, benchmarks, the LTV:CAC ratio, and practical ways to reduce CAC without stalling growth.

What is Customer Acquisition Cost (CAC)?

Customer acquisition cost measures how much you spend, on average, to acquire a new customer. It includes marketing campaigns, sales salaries, software, contractors—anything directly tied to bringing someone in the door.

The rise of digital marketing and SaaS made this metric essential. Before CAC, most teams just tracked spend. Now, they track efficiency.

Customer acquisition cost tells you if your go-to-market strategy is working—or if you're paying too much to grow. A high CAC usually means your targeting is off or your sales process needs work. A low CAC means you're reaching the right people, in the right places.

Why CAC matters for startups

For startups, customer acquisition cost is directly tied to survival. You’re working with limited capital. Every dollar spent on growth is one less for product, hiring, or keeping the lights on.

Investors care, too. They want to see that you can acquire customers for less than they’re worth. If CAC is $500 and customer value is $400, the math doesn’t work. If CAC is $100 and customers are worth $500, you can scale.

Your early CAC will usually be higher than it’ll be down the road. That’s expected. You’re building a brand, testing channels, and refining your message. Inefficient early CAC isn’t a dealbreaker. Investors know this. Still, you need a plan to reduce costs over time.

Customer acquisition cost shapes your roadmap. If it’s high, retention becomes a priority. If it’s low, maybe it’s time to double down.

The formula behind CAC

The core formula is simple. Divide total marketing and sales spend by the number of new customers acquired during that time.

  • figure out what counts as marketing or sales expense
  • decide if you’ll include full sales salaries or just a share
  • include the cost of CRMs, contractors, and design work if they help drive acquisition

Basic calculation

The quick formula looks like this:

CAC = total marketing and sales expenses ÷ number of new customers acquired

Example: You spend $10,000 on marketing last month. You sign 50 new customers. That’s a CAC of $200.

This method works for early-stage startups with simple sales. If you run Facebook ads and track instant signups, or you’re a single founder doing outreach, keep it simple. Add up obvious costs—ad spend, content, email tools, direct sales. Focus on what’s directly tied to acquisition.

Runway can help you simulate marketing, sales, and software costs to see real-time impact on your CAC.

Advanced variations

As you grow, dig deeper. Here’s a broader formula:

CAC = (marketing campaign costs + wages + software + professional services + overhead) ÷ customers acquired

This includes:

  • Full or partial salaries
  • CRMs and automation tools
  • Agencies or freelancers
  • Shared overhead (e.g. office space)

It’s especially useful for B2B companies or teams with longer sales cycles. You can also calculate customer acquisition cost by channel, segment, or campaign. Your organic CAC might be half your paid CAC—and that’s valuable to know.

How CAC connects to Customer Lifetime Value (LTV)

Customer acquisition cost doesn’t mean much alone. It only becomes useful when paired with lifetime value (LTV)—how much a customer brings in over time.

The link between these two metrics tells you if your business model is viable. The SaaS benchmark for LTV:CAC is about 3:1. That means every dollar spent to acquire a customer should return at least three dollars over their lifetime.

You need that 3:1 ratio to cover acquisition, serve the customer, pay overhead, and still have margin for profit and growth. Below 3:1? You’re overspending on acquisition or not generating enough per customer. Over 5:1? You may be too conservative and missing growth opportunities.

For early-stage startups, this ratio is critical. It shows cost efficiency. Investors look for scalable unit economics, and this metric gives them that evidence.

Always look at CAC and LTV together. Don’t just chase a low CAC if customers leave quickly or don’t upgrade. The quality of customers matters as much as the cost to acquire them.

CAC benchmarks and industry differences

CAC varies by industry and business model. Benchmarking against peers sets realistic targets and keeps you from chasing numbers that don’t fit your market.

  • SaaS B2B avg: CAC $239, LTV $956, ratio 4:1
  • SaaS B2C avg: CAC $233, LTV $583, ratio 2.5:1
  • eCommerce avg: CAC $84, LTV $255, ratio 3:1
  • Financial services avg: CAC $923
  • Cybersecurity avg: CAC $429

B2B sales cycles are longer and relationships matter more. B2C is about volume and self-service. eCommerce brings customers in cheaply but fights hard for retention.

Within SaaS, CAC shifts by target market. Fintech with SMBs: CAC $1,450. With enterprise, up to $14,772. Higher contract value and complexity push CAC up—but revenue potential rises, too.

Early-stage SaaS companies with less than $1M ARR may have CAC of 3–5x ARR. That’s normal during heavy testing and early iterations. You’re still finding ideal customers and refining your process.

Practical ways to reduce Customer Acquisition Cost

Customer acquisition cost isn’t just a marketing problem—it’s an efficiency problem. Here’s how smart teams reduce CAC:

  • Focus on the channels that work best. Don’t spread your budget thin. Go deep into two or three top channels and track them closely.
  • Put more budget where ROI is clear. Move dollars from low-performing to high-performing channels.
  • Lean into organic channels: SEO, content, and community deliver lasting CAC improvements. A strong blog or customer community pays dividends over time.
  • Optimize your funnel. Remove friction at each step—faster landing pages, simpler forms, clearer pricing equals higher conversion and lower CAC.
  • Test everything. Run A/B tests on ads, pages, emails, and CTAs. Simplified forms and money-back guarantees can lift conversion rates.
  • Build a referral program. Referred customers cost less and stick longer. Even simple incentives can turn your base into growth drivers.
  • Focus on retention, not just acquisition. It costs up to 5x less to keep a customer than get a new one. Higher retention = higher LTV = lower effective CAC.
  • Use automation and AI—lead scoring and smart email targeting focus human effort where it matters.
  • For B2B, consider account-based marketing. Focus resources on the best-fit accounts. The higher CAC can be offset by long-term revenue and relationship value.

How to calculate Customer Acquisition Cost in Runway

Runway connects your accounting and CRM systems so your CAC updates automatically.

You’ll:

  • Pull actual spend from your GL
  • Count customers from your CRM
  • Segment by channel or campaign
  • Build flexible CAC formulas that scale as you do

You can track CAC by cohort, by channel, by region—and tie it to revenue, margin, and payback periods. Runway gives you a live view of your customer acquisition cost, so you don’t have to chase spreadsheets every month.

Here’s how to set it up step by step:

1. Connect your data sources

First, you need to bring in the right data. CAC lives at the intersection of your spend (from accounting) and your new customers (from your CRM).

Connect your accounting system for acquisition spend

Link QuickBooks Online or NetSuite to pull in your Income Statement data. Runway uses Fivetran-backed integrations that bring in GL account balances by month, along with dimensions like Account, Department, Class, and Vendor. This is where your Sales & Marketing spend lives.

Connect your CRM for new customer counts

Connect Salesforce or HubSpot to pull deals. You’ll map how deals land over time (by Close Date) and filter for Closed Won opportunities. This gives you your new customer count each month.

Optional: Connect your revenue system for payback analysis

If you’re calculating CAC payback periods, connect Stripe to validate new subscriber counts and recurring revenue. This helps you measure how quickly customers pay back their acquisition cost.

2. Set up your source databases

Once you’ve connected your systems, Runway creates databases from each integration.

Your accounting template (like “IS Data” from QuickBooks or NetSuite) includes a timeseries driver for Income Statement Amount. It also brings in dimensions like Account Type, Account Name, Class, Department, and Vendor. You’ll filter these to isolate your acquisition spend.

Your CRM integration creates a Deals database with Deal ID, Stage, Close Date, Amount, and other fields. Configure the key columns to show as a timeseries so you can count new customers by month.

3. Create dimensions for segmentation

Dimensions let you slice your CAC by channel, campaign, region, or product. You can pull dimensions directly from your integrations or create them manually in Runway.

For example, if you want to separate paid vs. non-paid CAC, you’ll need to tag your GL accounts or vendors with a “Channel” dimension. Next, map account names or vendors to channels (like “Paid Marketing” or “Organic”), then use that dimension to slice and dice your data as needed.

4. Build a Model for your CAC drivers

Create a model to organize your CAC logic. Models are structured tables where each row is a driver. You’ll add formulas that reference your databases, apply filters, and calculate CAC.

Add a “New Customers” driver

This driver counts Closed Won deals each month. Write a formula that counts your Deals database Deal ID column, filtered to Stage = “Closed Won” and grouped by Close Date.

The pattern looks like this:

New Customers = count(<Deals: Deal ID> where Stage = 'Closed Won')

Insert the database column as a “pill” in the formula editor and apply filters through Runway’s reference UI.

Add an “Acquisition Spend” driver

This driver sums your Sales & Marketing expenses each month. Use the sum() function on your Income Statement Amount column, filtered to your S&M accounts by Account Type, Category, Name, Class, or Department.

The pattern:

Acquisition Spend = sum(<IS Data: Income Statement Amount> where Account Type in Sales & Marketing)

Add a “CAC (Blended)” driver

Now divide spend by new customers. Use ifError() to handle months with zero new customers:

CAC (Blended) = ifError(Acquisition Spend / New Customers, 0)

5. Calculate paid-only CAC

Most teams track both blended and paid CAC. Paid CAC only includes advertising and paid channel spend, excluding salaries, content, and other organic investments.

Create a “Paid Marketing Spend” driver by summing GL accounts or vendors tagged as ad spend. You can do this two ways:

  • Direct filtering: If your GL accounts are already categorized cleanly, filter to advertising accounts directly
  • Lookup mapping: Create a Lookup table that maps GL Account or Vendor to Channel = “Paid”, then filter by that dimension

Then add your Paid CAC driver:

CAC (Paid) = ifError(Paid Marketing Spend / New Customers, 0)

6. Segment CAC by channel, region, or product

To see CAC by channel (or any other dimension), you’ll segment your drivers. You can expand your model by a dimension or write formulas that reference “This Segment” to dynamically match the current segment context.

The pattern:

New Customers by Channel = count(<Deals: Deal ID> where Channel == This Segment)
Spend by Channel = sum(<IS Data: Amount> where Channel == This Segment)
CAC by Channel = ifError(Spend by Channel / New Customers by Channel, 0)

This gives you CAC broken out by each channel value automatically.

Build cohort-based CAC and payback periods (optional)

If you want to track CAC payback by cohort, follow Runway’s cohort modeling guide. The approach:

  1. Create a Cohorts database structured by acquisition month (using Contract Start or Close Date)
  2. Attach your CAC to each cohort (blended or channel-specific)
  3. Calculate cumulative revenue and gross margin over time for each cohort
  4. Compute months to payback when cumulative gross margin equals or exceeds CAC

You’ll use the date range functions to sum revenue over time and date functions like thisMonth, dateAdd, and dateDiff to calculate the payback period.

Separate actuals from forecast

Use the lastClose() function in your driver formulas to split historical actuals from forward-looking forecasts. This keeps your CAC reflective of what actually happened, while applying your forecast assumptions to future months.

Visualize CAC on a Page

Create a page to present your CAC metrics. Add:

  • A driver table block showing New Customers, Acquisition Spend, CAC (Blended), and CAC (Paid)
  • A chart block to plot CAC trends over time (line or column chart work well)
  • Optionally, add New Customers on a secondary axis to see the relationship between volume and efficiency

You can compare CAC across scenarios (Base, Upside, Downside) using scenario comparisons on your charts. Export charts as images or tables as CSV when you need to share with your team.

Core functions you’ll use

  • sum() – Add up spend across GL accounts
  • count() – Count new customers from deals
  • ifError() – Handle divide-by-zero errors gracefully
  • Date functions – Filter and group by time periods

Format your drivers

Set your CAC drivers to display as currency and format New Customers as a number. You can also adjust decimal places and add prefixes or suffixes in the driver details pane.

Example driver lineup

Here’s what a typical CAC model looks like in Runway:

  • New Customers – Count of Closed Won deals per month (using count() and filters)
  • Acquisition Spend (Blended) – Sum of Income Statement Amount filtered to Sales & Marketing accounts (from QuickBooks or NetSuite)
  • CAC (Blended) – ifError(Acquisition Spend / New Customers, 0)
  • Paid Marketing Spend – Sum of IS Amount filtered to Channel = “Paid” (using a Lookup or direct GL filters)
  • CAC (Paid) – ifError(Paid Marketing Spend / New Customers, 0)
  • CAC by Channel (optional) – Segmented drivers using This Segment for dynamic filtering
  • Cohort payback (optional) – Using cohort databases and date-range sums

Once you’ve built this foundation, you’ll have CAC metrics that update automatically each month as new data flows in from your accounting and CRM systems. You can track trends, compare channels, and share insights with your team—all from one place.

How Runway can help monitor your Customer Acquisition Cost

Tracking CAC is just the start. Modeling scenarios shows how small shifts in spend impact your runway and revenue. It’s about forecasting better and making decisions with real-time data. That’s what modern finance platforms unlock.

Runway connects your CAC data directly to the rest of your financials. Test new strategies, adjust headcount, weigh a new marketing channel, and see instant impact on runway. You get clear visibility for every what-if and more confident decisions.

The better your visibility, the better your calls.

Ready to model CAC the way modern teams do? Book a demo and see how Runway helps you build, track, and reduce customer acquisition cost with clarity.