Is my CAC good or bad relative to my market?
You know what you spend to get a customer. But is $680 good or terrible? It depends on your industry, your average customer value, and how long customers stay. Here's how to put your CAC in context.
The short answer
Is your CAC good or bad? Two tests: First, compare it to your customer lifetime value (LTV). A healthy LTV:CAC ratio is 3:1 or better. Second, compare it to industry averages. A $500 CAC is excellent for B2B services, expensive for a retail business, and catastrophic for a coffee shop.
CAC without context is just a number
Your CAC is $680. Is that good? If your average customer spends $8,400 over their lifetime, that is a 12:1 LTV:CAC ratio. That is excellent. You could afford to spend more. But if your average customer makes one purchase of $1,200, that $680 CAC eats 57% of revenue before you even account for cost of goods.
Industry benchmarks also matter. Home services businesses typically see $200-$500 CAC. SaaS companies range from $500 to $2,000+. Professional services firms might spend $800-$3,000. Knowing where your industry sits tells you whether to optimize or celebrate.
Two ways to evaluate whether your CAC is healthy
- LTV:CAC ratio. Customer lifetime value (average revenue per customer x average customer lifespan in months x gross margin) divided by CAC. A ratio of 3:1 means you earn $3 in gross profit for every $1 you spend to acquire the customer. Below 3:1 is a warning sign. Below 1:1 means you lose money on every customer.
- Industry benchmark comparison.Find the typical CAC range for your industry using sources like ProfitWell, HubSpot's annual marketing reports, or trade association studies. Place your CAC on that range.
How to benchmark your CAC using your own data and public sources
- 1Calculate your CAC
Total marketing and sales spend (from your P&L) / new customers acquired (from your CRM or invoicing) for the last 3-6 months.
- 2Estimate customer lifetime value
In QuickBooks, go to Reports→ “Sales by Customer Summary” for the last 12-24 months. Calculate average total revenue per customer over their full relationship. Multiply by your gross margin.
- 3Calculate LTV:CAC ratio
Divide LTV by CAC. 3:1 or higher is healthy. 1:1 to 3:1 is a caution zone. Below 1:1 means you are losing money on customer acquisition.
- 4Compare to industry benchmarks
Search for “[your industry] average customer acquisition cost” on HubSpot Research, ProfitWell, or industry reports. Note: benchmarks vary by company size and business model, so find the most relevant comparison.
Total time: 30-45 minutes. The LTV calculation is the most time-consuming because it requires analyzing customer purchase history over 12+ months.
Why CAC benchmarking requires regular updates
- Ad costs change quarterly.Platform costs fluctuate with competition and seasonality. A CAC that was “good” in Q1 might be “bad” by Q4.
- Customer value shifts. If average deal size drops, the same CAC becomes less affordable. Both sides of the ratio need monitoring.
Or see your CAC in context automatically every month
Bottomline connects to your accounting software, CRM, and ad platforms. It calculates your CAC, estimates your LTV, and compares both to industry benchmarks:
Bottomline gives you the full picture: your CAC, what it should be, and whether your customer lifetime value justifies it. No more guessing whether your acquisition spend is reasonable.