Customer acquisition cost calculator (CAC and MRR)

How to use the CAC and MRR calculator

1. Enter the acquisition numbers. Your sales and marketing spend for a period, as one total or as a breakdown, and the new customers you won in that same period. CAC appears as you type.
2. Enter the MRR numbers for one month. Paying customers at the start of the month, the average revenue per account (ARPA), and the new, expansion and churned MRR of the month. Movements you leave empty count as zero.
3. Add your gross margin. With CAC, ARPA and gross margin filled in, the calculator shows how many months a new customer takes to pay back what you spent to win them.

Any currency works, as long as you use the same one in every field. The numbers stay in your browser.

The CAC formula

CAC = sales and marketing spend ÷ new customers, both for the same period. Count everything you spent to win customers in that period:

• ads, sponsorships and paid listings
• salaries, commissions and contractors of the sales and marketing team
• the software they use, such as the CRM and email tools
• agencies, events, content and other campaign costs

Leave out the cost of serving customers you already have: support, hosting and account management for renewals belong in gross margin, not in CAC.

Worked example: CAC

A software company spends this in one quarter and wins 40 new customers:

CAC = 24,000 ÷ 40 = 600 per customer.

Measure spend and customers over the same window, and use a quarter rather than a month when your sales cycle is long: a deal you pay for in March may close in May. A month with a big campaign and few closed deals looks expensive, and the month after looks cheap, even when nothing changed.

Blended CAC and paid CAC

Blended CAC divides all spend by all new customers, including those who found you through search, word of mouth or a free tool. Paid CAC divides only paid channel spend by the customers those channels won. Blended CAC is the number for the whole business; paid CAC tells you whether your ads pay off. If most of your customers arrive organically, blended CAC can look healthy while a paid channel loses money.

CAC payback period

Payback months = CAC ÷ (ARPA × gross margin). ARPA times gross margin is the gross profit one customer brings each month, after the cost to serve them.

In the example, ARPA is 100 per month and gross margin is 80%, so each customer brings 80 of gross profit a month. Payback = 600 ÷ 80 = 7.5 months. At a 50% margin, the same CAC takes 12 months to pay back.

A common target for subscription businesses is 12 months or less. The right number for you depends on how long customers stay and how much cash you have: compare it with your churn. A customer who leaves after 6 months on a 7.5 month payback never paid back what you spent. The customer lifetime value calculator shows how long an average customer stays.

MRR and net MRR growth

MRR = paying customers × ARPA. Count each subscription at its monthly value: an annual plan counts as one twelfth of its price each month. Leave out setup fees, one-time charges and usage that does not repeat.

Over a month, MRR moves in three ways:

• New MRR from customers who started paying this month.
• Expansion MRR from existing customers who upgraded or added seats.
• Churned MRR lost to cancellations and downgrades.

Net new MRR = new + expansion − churned, and net MRR growth = net new MRR ÷ MRR at the start of the month.

Worked example: MRR

The same company starts the month with 500 customers at an ARPA of 100, so MRR is 50,000. During the month it adds 4,000 of new MRR (the 40 new customers at 100) and 1,500 of expansion MRR, and loses 2,000 to churn.

• Net new MRR = 4,000 + 1,500 − 2,000 = 3,500.
• MRR at the end of the month = 50,000 + 3,500 = 53,500, which is 642,000 a year (ARR).
• Net MRR growth = 3,500 ÷ 50,000 = 7%.
• MRR churn = 2,000 ÷ 50,000 = 4%.

Watch the churn line as closely as the new line. Here churn takes back half of the new MRR. Halving it would add 1,000 of MRR every month without one more ad.

Where support fits in

Support touches both sides of these formulas. Prospects who get correct answers before they buy can convert more often, which lowers CAC for the same spend. Customers who get answers after they buy are less likely to leave, which makes the payback real. To measure how customers feel about that support, use the CSAT calculator or the NPS calculator.

Paperlink AI answers the repeat questions of prospects and customers from your own help pages and documents, and passes the questions it cannot answer to your team.