Why Your CAC is Probably Wrong

Most founders calculate Customer Acquisition Cost (CAC) by dividing their total marketing spend by the number of new customers. This is wrong.

Here’s why: your marketing spend includes campaigns that don’t work, brand building that pays off three months later, and retargeting efforts aimed at existing customers. If you’re not segmenting by channel, cohort, and time period, your CAC number is useless.

The right way to calculate CAC: measure it per channel (organic, paid, referral), per cohort (when they signed up), and with a time lag (how long from first touch to conversion).

When you break it down this way, you’ll often find that one channel has a CAC 10x lower than another—but you’ve been averaging them together and calling it ‘our CAC.’

The implication: double down on what works, kill what doesn’t, and stop averaging your way to mediocrity.