# What is CAC (customer acquisition cost)? > CAC, customer acquisition cost, is what you spend to win one paying customer. How to calculate it, what to include, and how it compares with LTV. **CAC (customer acquisition cost)**: CAC is the average amount a business spends on sales and marketing to win one new paying customer. CAC is the average amount you spend on sales and marketing to win one new paying customer. ## The short definition and formula **CAC = sales and marketing spend in a period / new paying customers in that period** Spend $1,500 in a month on ads, a newsletter sponsorship and a launch tool, win 10 new paying customers, and CAC is $150. Count paying customers only: free signups and trials are a step before. Many teams calculate it per channel too. A blended CAC of $150 can hide one channel at $40 and another at $600. ## What to include Paid ads, sponsorships, affiliate and referral payouts, marketing tools and contractors all count. For a company with a sales team, salaries do too. For a solo maker, the honest version also counts your own hours: twenty hours of cold outreach that wins five customers is not free just because no invoice arrived. Leave out costs of running the product itself, like hosting and support. Those belong in gross margin, which feeds [LTV](https://makerhandle.com/glossary/ltv). ## CAC next to LTV and payback CAC on its own says little. Next to lifetime value it says whether growth makes money: LTV of $600 and CAC of $150 is a 4 : 1 ratio. **Payback** is how many months of gross profit a customer takes to cover their CAC: at $24 of margin a month, $150 is paid back in a bit over six months. Bootstrapped makers usually care most about payback, because cash spent on acquisition has to come back before it can be spent again. Run your own numbers in the [LTV calculator](https://makerhandle.com/tools/ltv-calculator), which takes CAC as an optional input. ## Lowering it The cheapest customers usually come from places you already are: an audience you built in public, communities where you help before you sell, search traffic to useful pages, and people your customers tell. Our guide to [getting your first 100 users](https://makerhandle.com/blog/how-to-get-first-100-users) goes through the channels that cost time rather than money, and a [link in bio](https://makerhandle.com/glossary/link-in-bio) that shows every project turns a profile visit into a click. ## Questions ### What does CAC stand for? Customer acquisition cost: what you spend, on average, to win one new paying customer. ### How do I calculate CAC? Divide sales and marketing spend in a period by the number of new paying customers in that period. $1,500 and 10 customers is a CAC of $150. ### Should I include my own time in CAC? If you want to compare channels honestly, yes. Put a rough hourly value on outreach and content so a "free" channel that eats your week shows its real cost. ### What is the LTV to CAC ratio? Lifetime value divided by acquisition cost. About 3 : 1 is a commonly quoted rule of thumb for SaaS. --- Source: https://makerhandle.com/glossary/cac makerhandle: makerhandle is a link in bio for makers and founders: every project with its status and revenue verified from Stripe, Paddle and more.