How to Calculate Your Customer Acquisition Cost (CAC) in 3 Easy Steps!

About this video

Dan Martell explains why founders understate Customer Acquisition Cost (CAC) when pitching investors, drawing on pitching for his third, venture-backed company out of five software companies he says he built. Principle one is that CPA does not equal CAC: CPA is typically just ad spend — for example, $1,000 a month on Facebook bringing in 100 customers is a $10 CPA — and excludes everything else. Principle two is the CAC equation: for a chosen period (weekly, monthly, quarterly or yearly, and sometimes per segment), add marketing expenses plus sales expenses and divide by the number of new customers acquired in that period. Principle three is what ‘fully loaded’ means: include salaries, overhead such as lease cost apportioned by the share of office square footage dedicated to sales and marketing (he gives 20% as an example), software tools including CRM, attribution and marketing platforms, ad costs, and arguably part of customer success tied to expansion or retention — though he says he would count only their bonuses, not salaries. He closes by offering his Precision Scorecard as a framework for visibility and accountability on core funnel metrics.

Key takeaways

• CPA is not CAC: CPA usually counts only ad spend, while CAC counts the full cost of acquiring a new customer.
• Calculate CAC as (marketing expenses + sales expenses) divided by new customers acquired in the same period.
• Measure CAC consistently by period and, where relevant, by customer segment or plan.
• A fully loaded CAC includes salaries, apportioned lease/overhead, SaaS/CRM/attribution tools, and ad costs, not just media spend.
• Consider whether customer-success compensation tied to expansion or retention belongs in CAC, and be explicit about what you include.

Episode details: published October 26, 2020 · 5:35 long. Summary written by Self Growth Videos from the episode itself. Business results and any income figures mentioned are Dan Martell’s own claims, shared for education — they are not typical or guaranteed.

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