How do you calculate CAC for a given period?

How do you calculate CAC for a given period?

• A. CAC = total revenue generated ÷ number of new customers.
• B. CAC = total sales and marketing expenses for the period divided by revenue from new customers.
• C. CAC = total sales and marketing expenses for the period divided by number of new customers acquired in that period minus existing customers.
• D. CAC = total sales and marketing expenses for the period divided by the number of new customers acquired in that period.

Answer: (D)

CAC measures how much you spend to acquire each new customer in a given period. To get it, take the total sales and marketing expenses for that period and divide by the number of new customers you actually acquired during that same period. This gives the cost per new customer and directly reflects the efficiency of your customer acquisition. Using total revenue in the numerator would mix a revenue metric with a cost, producing a cost-per-revenue figure rather than CAC. Dividing by revenue from new customers would again mix cost with revenue, yielding a cost per dollar of revenue rather than cost per customer. Subtracting existing customers from the denominator while counting new ones misaligns what CAC measures, since CAC is about the cost to obtain each new customer, not adjusted by the size of your current customer base.

CAC measures how much you spend to acquire each new customer in a given period. To get it, take the total sales and marketing expenses for that period and divide by the number of new customers you actually acquired during that same period. This gives the cost per new customer and directly reflects the efficiency of your customer acquisition.

Using total revenue in the numerator would mix a revenue metric with a cost, producing a cost-per-revenue figure rather than CAC. Dividing by revenue from new customers would again mix cost with revenue, yielding a cost per dollar of revenue rather than cost per customer. Subtracting existing customers from the denominator while counting new ones misaligns what CAC measures, since CAC is about the cost to obtain each new customer, not adjusted by the size of your current customer base.