Customer acquisition cost divides the money spent winning new customers by the number of new customers won. The formula rarely causes arguments. The numerator does, because most cost lines sit somewhere between clearly acquisition and clearly something else.
The test that settles most cases
A cost belongs in CAC if cutting it would reduce your ability to win new customers. An SDR salary passes. A renewal manager salary fails. Marketing operations tooling passes. The finance team's payroll software fails. Run every line through that question before arguing about the accounting category it sits in.
What belongs in the numerator
| Cost line | In CAC | Note |
|---|---|---|
| Sales and marketing payroll with benefits and taxes | Yes | Fully loaded, including SDRs, AEs, and marketing staff |
| Commission and bonus on new business | Yes | Accrued in the period the deal closes |
| Media, events, and content production | Yes | Including agency and freelance production |
| Sales and marketing software | Yes | CRM seats, enrichment, ad platforms, automation |
| Sales and marketing leadership | Yes | Allocated if the role also covers renewals |
| Customer success on existing accounts | No | Retention cost |
| Renewal and upsell selling | No | Belongs in expansion CAC |
| Product engineering | No | R&D |
| Finance, legal, HR, and office | No | G&A |
The lines teams leave out
Commissions come first, then the employer side of payroll, then sales tooling, then content produced by people whose title says something other than marketing. Each omission lowers reported CAC and shortens reported payback. The gap surfaces later when a board compares the payback slide against the cash the company actually consumed, and the two numbers describe different companies.
Free-tier infrastructure is a genuine edge case. Hosting for users who have never paid functions as acquisition spend, so decide where it sits, write the rule down, and hold it.
Consistency beats precision
The allocation policy matters less than holding it fixed. A CAC built on a slightly generous definition and held steady for eight quarters tells you the direction of acquisition efficiency. A CAC rebuilt on a new definition each quarter tells you nothing, because every movement mixes real change with definitional change.
Write the policy down, including the split rules for shared roles, and change it only at the start of a fiscal year with the prior periods restated. That discipline is what makes customer acquisition cost usable in planning rather than a number that gets relitigated every board meeting.
Once the definition is stable, the same allocation feeds CAC payback period and the expansion side of the model, where spend aimed at the installed base gets measured against net revenue retention instead of new logos.
Frequently Asked Questions
Do sales commissions count in CAC?
Yes. Commission on new business is a direct cost of winning that business and belongs in the numerator. Excluding it is the most common way teams report a CAC that looks better than the cash the company spent. Commission on renewals stays out, since renewal is a retention cost.
Does CAC include customer success salaries?
Customer success spend on existing accounts stays out of CAC. Onboarding and implementation delivered to a new customer is a cost of serving revenue, so it belongs in COGS, where it lowers gross margin and lengthens payback. Neither belongs in the acquisition number.
How do you handle a rep who sells new business and expansion?
Allocate the cost by bookings mix or by logged selling time, then write the rule into your metrics definitions. A rep splitting 70% new logo and 30% expansion puts 70% of loaded cost into new-logo CAC and 30% into expansion CAC. Apply the same split method every quarter.
Does CAC include brand and content spend that pays off later?
Yes, in the period the money is spent. Capitalizing brand investment against future customers makes CAC unfalsifiable. Report it in the period, and use a longer trailing window such as trailing twelve months when the lag between spend and closed revenue is long.
Put these metrics to work
ORM builds custom revenue forecast models that turn concepts like what costs are included in cac? into prescriptive action for your team.
Schedule a Demo