Customer acquisition cost (CAC) calculator

How to read these results

CAC (customer acquisition cost) is everything you spend to win customers, divided by the number of new customers. Counting only ad spend gives a flattering figure: the full CAC also includes agencies, tools, welcome discounts and the time spent on acquisition.

Profit on the first order compares the margin of one order with the CAC. If it is negative, the first order doesn't pay for the customer: you only make money if they order again. The number of orders needed to pay back the CAC tells you how many orders that takes.

The ratio compares the margin a customer brings in over their lifetime with what they cost to acquire. It shows whether your acquisition is profitable over time, not just on the first order.

The CAC formula

• CAC = (ad spend + other acquisition costs) ÷ number of new customers, over the same period.
• Margin per order = average order value × margin per order (%).
• Orders to pay back the CAC = CAC ÷ margin per order, rounded up.
• Customer value to CAC ratio = (margin per order × orders per customer over their lifetime) ÷ CAC.

Two worked examples

Store A spends $5,000 on ads and $1,000 on other acquisition costs in a month, and wins 240 new customers. CAC: 6,000 ÷ 240 = $25. With a $60 average order and a 50% margin, each order leaves $30: the first order pays back the CAC with $5 to spare. Over 3 orders per customer, a customer brings in $90 of margin, a ratio of 3.6 : 1.

Store B spends $3,000 on ads and wins 60 new customers: a $50 CAC. With a $45 average order and a 40% margin, each order leaves $18: it takes 3 orders to pay back the CAC. But its customers only order twice on average, i.e. $36 of margin, a ratio of 0.7 : 1. Every new customer loses money.

Mistakes that distort your CAC

• Dividing by all orders instead of new customers: returning customers make the CAC look lower than it is.
• Counting only ad spend: agencies, tools and discounts are acquisition costs too.
• Mixing periods: compare spend and new customers over the same weeks, and allow for the delay between an ad and a purchase.
• Looking at the CAC alone: a $40 CAC is excellent for a $200 order and a disaster for a $25 one. Always compare it with your margin.

How to lower your CAC

• Improve your conversion rate: product pages, reviews and answers to common questions turn more of the same visitors into customers.
• Raise the average order value with bundles or a free shipping threshold, so each customer pays back their CAC faster.
• Build free channels: SEO, content, referrals and word of mouth bring customers without ad spend.
• Get customers to order again: repeat orders spread the CAC over more purchases and improve the ratio without spending more.

Frequently asked questions

How do I calculate CAC for my Shopify store?

Add up everything you spent on acquisition over a period (ads, agency, tools, welcome discounts) and divide by the number of new customers over the same period. In Shopify, the number of new customers appears in the analytics reports; spend comes from your ad platforms and invoices.

What is a good CAC for ecommerce?

There is no universal figure: a good CAC is one your margin can pay back. Compare it with the margin of a first order and with the margin a customer brings in over their lifetime. A ratio of 3:1 between the two is often used as a benchmark.

What is the difference between CAC and CPA?

CPA (cost per acquisition) usually measures the cost of one conversion in an ad platform, for example an order or a sign-up. CAC measures the total cost of winning a new customer across all your channels, and only counts first-time buyers.

How long should it take to pay back the CAC?

Ideally from the first order, otherwise within a few orders that most customers actually place. If you need more orders than your customers place on average, acquisition is losing money.