Accounting Customer Acquisition Cost (Annual) Calculator
Calculate your annual customer acquisition cost by dividing sales and marketing costs by the number of new customers acquired.
Overview
This annual customer acquisition cost calculator estimates how much your business spent, on average, to gain each new customer over a year. Enter annual advertising spend, direct sales costs, other marketing costs, and the number of new customers acquired.
How it works
Customer acquisition cost (CAC) is calculated by adding the sales and marketing costs you choose to include, then dividing that total by the number of new customers acquired in the same period. Keeping the cost period and customer count aligned is important. For example, an annual cost total should be divided by annual new-customer acquisitions, not by all active customers.
How to use this calculator
- 1Enter your advertising and promotional spend for the year.
- 2Add annual direct sales costs, including relevant payroll and commissions.
- 3Enter other marketing costs such as software, agencies, events, and marketing payroll.
- 4Enter the number of customers acquired for the first time during the same year.
- 5Review the average customer acquisition cost and included total costs.
Example Calculation
Annual advertising spend
$50,000
Annual sales costs
$75,000
Other annual marketing costs
$25,000
New customers acquired
500
Customer acquisition cost
$300.00
Total acquisition costs are $150,000. Dividing this by 500 new customers gives an average customer acquisition cost of $300.00 per new customer.
Frequently asked questions
What is annual customer acquisition cost?
Annual customer acquisition cost is the average amount spent on sales and marketing to gain one new customer over a year.
What costs should be included in CAC?
Businesses commonly include advertising, sales compensation and commissions, marketing payroll, agencies, software, events, and campaign production costs. Apply a consistent policy from period to period.
Should I include existing or renewed customers?
Usually no. CAC is generally based on customers acquired for the first time. Retention and renewal costs can be tracked separately.
Why should costs and customers cover the same period?
Matching the time period makes the ratio more meaningful. Using annual costs with a monthly customer count can materially distort the result.
Is a lower customer acquisition cost always better?
Not necessarily. CAC should be considered alongside customer value, gross margin, retention, growth goals, and the quality of customers acquired.
Can I calculate CAC by marketing channel?
Yes. Use the same formula for a channel by entering that channel's attributable costs and the new customers attributed to it over the same period.
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Assumptions and warnings
Assumptions
- Only costs entered in the calculator are included in total acquisition costs.
- New customers are counted once, when they are first acquired during the year.
- The result is an average and may differ by channel, campaign, product, or customer segment.
- Costs and customer acquisitions are assumed to relate to the same annual reporting period.
Warnings
- This calculator provides a planning and accounting estimate only; use your business's accounting policies and records when preparing financial reports.
- Customer acquisition cost does not show profitability, customer lifetime value, retention, or cash-flow timing.