Introduction

“Know your numbers” is good guidance for any founder, but some numbers matter more than others. Customer acquisition cost (CAC) is one of the few numbers your startup relies upon for success — or failure.

How do you calculate the customer acquisition cost for your startup? And is it any good? Let’s dive into the calculations, averages, and ways to lower your costs.

The startup metric you can’t ignore: customer acquisition cost

Mismanaged cash flow is one of the biggest reasons startups fail. It’s why you need a strong handle on your startup’s financial metrics and the larger story your data tells you.

Metrics and performance indicators you’ll usually see in your reporting include:

• Click-through rate (CTR): The number of people who see your ads and then click on them.
• Cost per lead (CPL): The average cost to acquire a single lead (not a customer).
• Trial conversion rate: The percentage of free users who become paying customers.
• Activation rate: How many new users reach a meaningful milestone, like their first login or in-platform purchase.
• Customer lifetime value (LTV): The total revenue a customer brings to your startup over their lifetime.

If you’re newer to the startup world, these metrics can feel like alphabet soup. But the one that’s central to most others — the one you need to keep a pulse on? That’s customer acquisition cost (CAC).

What is customer acquisition cost?

Your customer acquisition cost (CAC) measures how much money your startup spends to acquire a single new customer. CAC includes all sales and marketing expenses directly tied to customer acquisition. Think ad spend, acquisition-focused software tools, and salaries and commissions for those closing deals.

Startups usually carry a blend of direct and indirect costs in their acquisition pipeline. Direct costs, like your spend with HubSpot, are typically easier to track. Indirect costs, like founder time or salary for a unicorn hire, are equally important, but they take some effort to unpack. Understand both types of costs to see how scalable your startup actually is.

Why does CAC matter for your startup?

Apart from managing your spending, knowing your CAC is a solid indicator of your startup’s current operational efficiency and path toward growth and scalability. 

Running profitably and sustainably

Like many healthy startups, you’re likely operating with 18-24 months of runway. It pays to be smart with your money. Understanding CAC helps you see where your money goes to acquire additional revenue streams (aka paying customers) and adjust toward more cost-effective strategies as needed. That’ll help you as you plan for scalability as well.

Attracting investors

Potential investors will review a slew of metrics and performance indicators to determine if they’ll invest in your business. CAC is an especially important metric, as it shows you have a good handle on your current capital expenditures. An optimized CAC shows a clearer path toward growth, something that excites investors.

Making smarter long-term decisions

Marketing and sales need to thrive if you want to grow revenue. Plus, you want data-backed signals on what’s working and what needs changing. Measuring CAC overall and by marketing channel or customer segment can help you decide where to allocate your resources, and when to step on the gas and scale.

Benchmarking for goals and growth

Your CAC will adjust over months, quarters, and years. The earlier you measure, the deeper your data set will be. You can benchmark your startup using owned data (instead of relying on reported averages), helping you set targeted goals for short- and long-term success.

How to calculate customer acquisition cost

Here’s a simple customer acquisition cost formula to help you get started.

CAC = (Cost of sales + Cost of marketing) / Number of new customers

Your CAC should reflect a specific period. Most often, it’s a figure you calculate quarterly. 

How does this look in real life? Let’s try a simple example.

Let’s say you’re an early B2B startup acquiring early customers. You have some ad spend and a part-time email marketing contractor, you’re handling founder-led sales, and you’re paying for a CRM for sales and onboarding needs.

You’re reviewing your books and find these expenses for the last quarter:

• LinkedIn ads: $2,500
• Contractor: $1,000
• CRM (sales and onboarding): $3,000

You also spend around 20 hours per month on sales activities and assign a $50 per hour rate to your work. That’s $3,000 for the quarter.

Finally, all that work netted you 12 new customers.

Now, your first instinct might be just to use the cost of ads and the contract to get a CAC of $291.67. But, like many founders, you’re ignoring your time or the CRM spend, causing you to underestimate CAC. That pain compounds as you scale.

Your actual CAC should include:

• LinkedIn ads
• Contractors
• Part of your CRM used for sales (let’s say 50% for this exercise)
• Founder's time spent on sales

Your calculation would then be:

CAC = ($2,500 + $1,000 + $1,500 + $3,000) ÷ 12

CAC = $8,000 ÷ 12 = $666.67 per customer

It’s a larger number that might look scary on a pitch deck or quarterly report. But an honest CAC assessment lets you find your weaknesses faster — before you push to scale and things implode.

Where do CAC calculations go wrong?

Along with underestimating founder time, many leaders make a few common but critical mistakes in CAC calculations:

• Plugging in the wrong numbers, such as leads instead of paying customers
• Overlooking one-off campaign costs like a marketing refresh or single PR push
• Mixing in retention costs like customer training and education programs

Also, consider segmenting CAC by channel or customer type. The overall number matters, but a segmented CAC can show which channels or customers deliver significant value and which are potentially draining resources.

Pro tip: If you’re struggling with CAC inputs, segmentation, and calculations, check out the CAC calculation tool within the HubSpot Customer Service Metrics calculator. It’ll guide you through the process and help you get to the real number so you can make the best decision for your startup’s future.

Average CAC for startups by industry

Your CAC will vary based on industry, product, channel, audience (and many other factors). But here are general per-customer figures for startups to help you benchmark (via FirstPageSage):

• B2B (all reported industries): $609
• B2C (all reported industries): $212
• B2B SaaS: $273
• B2C eCommerce: $68

Additional B2B industry averages include:

• IT and managed services: $583
• Biotechnology: $694
• Manufacturing: $784
• Financial services: $923
• Higher education: $1,424

You can explore more vertical-specific B2B and B2C benchmarks in the full report from FirstPageSage.

Overall, averages and similar figures can help you check your gut, especially if you’re newer to the startup world. However, don’t rely too heavily on comparing yourself to averages. CAC is typically higher in earlier-stage startups. And you might need to run higher CACs if you’re trying to out-compete other products or pull in highly valuable customers.

CAC is an important metric, of course. But it’s only one of many that all work in concert to tell the story of your startup’s health.

Is your CAC where it should be?

“What is a good CAC?” is a bit like “What’s the right temperature for soup?” It depends on who’s eating and what else is on the table. There’s no universally “right” answer. But you’ll know when it’s too hot (unsustainable) or too cold (you’re not investing enough to grow).

Contextualizing CAC with your other metrics and KPIs helps you accurately assess performance and efficiency. For example, you don’t want to spend too much money converting customers who don’t pay back. You track that with your lifetime value (LTV)/CAC ratio. Common guidance recommends an LTV/CAC ratio of three or higher for “good” performance.

CAC also changes as you launch and scale your startup. The guidance for your first few quarters in business won’t hold the same weight after a few years. Factors to consider include:

• Intra-industry competition: Highly competitive industries like real estate have higher CACs as companies wage expensive wars for customer attention.
• Development stage: Earlier-stage startups are vying for attention and brand recognition, which drives up CAC.
• Financial position: More revenue and funding rounds give you more resources (and buy you more time) to test new avenues that might lower CAC.

Is your customer acquisition plan working?

As you analyze your CAC against other KPIs, you may wonder: “When is it my plan failing instead of external factors?” Watch for these red flags:

• High CAC vs LTV: You’re spending more to acquire a customer than the revenue that that customer generates.
• Low conversion rates: Significant numbers of leads leak out of your funnel before they convert into paying customers.
• High churn rate: Customers you acquire don’t stick around for long and don’t meaningfully engage with your product.
• Too many discounts: Constantly slashing prices to entice customers shows a mismatch between your value proposition and the market’s appetite.
• No repeat customers: Customers don’t come back and don’t recommend your product to their circles.

Investigate these potential gaps for cost savings before redoing your strategy.

3 real-world ways to lower customer acquisition costs

High CAC values can scare even the most stalwart founder. If those high values persist, you might feel tempted to pivot strategies and go for something completely different.

But before you raze your acquisition plan to the ground, try a few tweaks and adjustments. I asked some founders and company leaders what they did to lower CAC in their startups.

Post-purchase surveys

A newly acquired customer can be a fount of wisdom for finding more customers, if you know what to ask them. That’s why Maxwell Finn, founder of Unicorn Innovations, has worked hard to perfect post-purchase customer surveys at the tail end of the acquisition process.

“Post-purchase customer surveys are my secret weapon for lowering CAC. There's no added friction and no drop in conversion rates,” Finn said. “If you build your post-purchase survey right, customers will feel like they're actually getting value. They're investing their time into making sure you know who they are and what they want.”

Finn noted that his surveys let him gather demographic information to refine ICPs, funnel paths to optimize ad spend, and purchase goals to improve his company’s products. To him, the timing after purchase is perfect.

“Post-purchase is the time to do this,” he told HubSpot for Startups. “You'll never get richer feedback with less downside than immediately after they hit the buy button.”

Bold tests within the marketplace

Testing messaging often calls for an incremental process — it’s why I (and many other marketers) usually recommend experiments like landing page split tests with small, controllable variables. So when Nicholas Teddy, VP of Growth at Goody, shared his big and bold testing strategy, I took notice.

“Most companies think about conversion rate optimization too incrementally, as just a series of small experiments with controlled variables. The truth is, you don't have time for that,” Teddy said. “Test two completely different pages with different messaging, and you may be able to leapfrog multiple cycles of iteration and refinement.”

It goes beyond changing short CTA — Teddy pushes for entirely different pages. In fact, they should look entirely different “even if you’re standing back five feet from your screen,” he said.

Hyper-targeted messaging and audience engagement

Low conversion rates from top-of-funnel activities like ads typically show you’re missing the mark on messaging. That was the case for Mimi Nguyen, founder of Cafely, who saw strong CTRs on ads for her coffee brand but a rough conversion rate. A quick review found her initial messaging — “Authentic Vietnamese coffee” — was too generic and bland.

“We narrowed our audience to Asian-American millennials and coffee lovers craving bold, nostalgic flavors, then we rewrote our ad copy to sound like me, which means less polished and more personal,” Nguyen said. “‘Grew up on ca phe sua da. Couldn't find the real thing here, so I made it myself.’ That one line cut through.”

Along with a post-purchase referral offer and user-generated content push, she reduced CAC by 35% over two months.

“Our biggest shift was realizing CAC isn't simply a media problem, it's a message problem,” Nguyen said. “Once we spoke to the right people in the right way, everything clicked.”

Set your CAC goals today

Customer acquisition cost isn’t the flashiest number in your pitch deck, but it’s vital for your profitability. Ignore CAC for too long, and it’ll silently wreck your margins. But get it right, and you’re both spending smarter and setting up your business for sustainable growth.

Analyze your customer acquisition cost, break it down by customer and channel, and see what’s worth doubling down. With smart planning and tweaking, you can understand and optimize your CAC and drive real growth.

Now that you know your CAC, how do you get more customers in your pipeline? Check out our guide to acquiring your first 1,000 customers.

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