Dr. Paul Borosky, DBA, MBA
Business Consultant · Author
Customer Acquisition Cost: Formula and Example by Marketing Channel
Customer acquisition cost is what you spend to win one paying customer. Divide what a channel cost by the paying customers it brought in. Run it channel by channel and the marketing that only looks good stops hiding.
Last Updated: 10/29/2026 · Written by Dr. Paul Borosky, DBA, MBA
The Short Answer
What Is Customer Acquisition Cost?
Customer acquisition cost (CAC) is the money spent to win one paying customer. The formula: marketing cost for a channel divided by the number of paying customers that channel produced.
Most owners know what they spend on marketing. Few know what each paying customer cost. That gap is why so many businesses keep the ad that feels like marketing and stop the referrals that feel like luck.
Hazy Hazel the squirrel throws the most beautiful party Doctor Owl has ever seen: painted lanterns, hazelnut tarts, a table set for forty. Doctor Owl and Mrs. Owl-Willow are the only guests. “Where did you leave the invitations?” he asks. “Oh, everywhere special,” says Hazel.
Which of Your Marketing Actually Pays?
The Formula
How Do You Calculate Customer Acquisition Cost?
- 1
Pick a time period
One month is easy to track and long enough to see a pattern.
- 2
Add up what the channel cost
Money spent, plus any printing, cards, or fees tied to it.
- 3
Count paying customers from that channel
Not likes. Not calls. Customers who paid.
- 4
Divide
Channel cost divided by paying customers equals CAC for that channel.
To get paying customers by channel, you need the lead source for every customer. That takes one question, asked every time: “How did you hear about us?”
Bangor is the shopping and services hub for much of eastern and northern Maine, so customers often travel far to reach it. Factor that reach into acquisition costs with business plans for Maine owners.
Worked Example
What Is a Customer Acquisition Cost Example by Channel?
Take one month for a small pressure washing company. Here is its scoreboard with CAC added:
| Source | Calls | Paying customers | Spent | CAC (spent / paying) |
|---|---|---|---|---|
| Referrals from past customers | 9 | 6 | $40 | $40 / 6 = $6.67 |
| Online business listing | 14 | 5 | $0 | $0 / 5 = $0 |
| Yard signs at finished jobs | 6 | 3 | $120 | $120 / 3 = $40 |
| Door hangers | 11 | 1 | $450 | $450 / 1 = $450 |
| Paid social media ad | 8 | 0 | $600 | No paying customers |
| All channels | 48 | 15 | $1,210 | $1,210 / 15 = about $80.67 |
The blended CAC is about $81. That number alone hides the story. The paid ad got the most likes and produced zero customers. The referrals and the free listing did most of the work for almost nothing. Cut the ad, keep asking for referrals, and the blended CAC drops to about $40.67 ($610 / 15) with the same number of customers.
When an owner tells Dr. Paul that marketing does not work, his first question is: which marketing? Most of the time, nobody knows. In his experience, most marketing problems start as tracking problems. The mistake he sees most is the stop and start. Owners market hard when they are slow, stop the moment they are busy, and wonder why the busy season ended so suddenly. The tally sheet is boring. It is also what tells you where your next customer is.
For Owners
How Do I Know Which Marketing Is Actually Working?
- 1
Call your last 10 to 20 customers
Thank them and ask how they first heard of you.
- 2
Start a Lead Source Scoreboard
Ask every new caller the one question. Each month, count calls and paying customers by source. See the Lead Source Scoreboard.
- 3
Keep your best source running
Busy or not. Stopping it is how feast or famine starts.
- 4
Cut after 90 days
Drop any source that brought no paying customers and move that money to the one that did. Test one new idea at a time.
For Managers
How Do I Measure Marketing Results by Channel?
You or the front desk answer most calls, so the one question is yours to ask. Ask it every time and keep the tally honest, even when the phone is busy. Bring the scoreboard to the owner once a month. Numbers beat opinions in that meeting.
To set next month’s spend from the results, see how to set a marketing budget.
For Business Students
What Is the Difference Between CAC, ROI, and Marketing Attribution?
CAC tells you what one customer costs. ROI compares what you got back with what you spent. Marketing attribution decides which channel gets credit for a sale. The Lead Source Scoreboard is the simplest version of attribution: first touch, recorded by asking the customer.
Comparing the cost to win a customer across channels shows which marketing earns its keep. See which Pompano Beach marketing actually works.
It matters. In a 2016 survey of 1,000 U.S. small businesses, 62 percent said their marketing was not effective or that they did not know.
Source: Infusionsoft and LeadPages 2016 Small Business Marketing Trends Report, reported by MarTech.
Portsmouth’s historic downtown and harbor draw summer and fall visitors. Shops there can plan seasonal ad spend around them, as Dr. Paul’s New Hampshire page explains.
Next Step
What If My Marketing Problem Is Really Something Else?
Sometimes the calls come in and the customers still do not stick. Take the 60-second self-check and see Fire 14 on the pillar for the full fix.
Long sales cycles raise the cost to win each customer. Dr. Paul breaks down why Davie sales take so long to close.
Questions
What Else Do People Ask About Customer Acquisition Cost?
What is a good customer acquisition cost?
Should I include free channels in CAC?
How often should I calculate CAC?
What if customers do not remember how they found me?
Track the source. Keep what pays. Cut what does not.
Get the Book →Written by Dr. Paul Borosky, DBA, MBA, business consultant, strategic planner, and business plan writer with 14+ years and 1,000+ businesses served.
This page is for general educational purposes only. It is not legal, financial, or other professional advice.