How to calculate true CAC for an ecommerce brand (not the number you want to believe)

CAC — customer acquisition cost — is one of the most important metrics in growth, and one of the most frequently gamed. Not necessarily maliciously. But the version most teams report is the 'favorable' version. Here's what a real CAC calculation looks like.

The three versions of CAC

Version 1: Paid CAC (what most teams report)

Total paid ad spend ÷ new customers from paid channels. Easy to calculate. Often the number in the weekly brief. The problem: it doesn't include the human cost of managing those ads, any other marketing spend (email, influencer, content), or the channel contribution from organic.

Version 2: Blended CAC (more honest)

Total marketing spend (all channels, including team cost) ÷ total new customers. This is the number most investors and operators care about when they ask 'what's your CAC?'

Version 3: True CAC (what you should use for decisions)

Total cost of customer acquisition including: ad spend + marketing team loaded cost + agency/contractor fees + content production + tools and software + fulfillment for first order + payment processing fees, divided by new customers in the period.

Calculating it automatically

This gives you the paid-channel CAC. To get to true CAC, you'll need to add team and tool costs manually (Merit can't read your payroll). But using Stripe as the customer source of truth rather than platform-reported conversions already gets you much closer to the real number.

LTV:CAC: the ratio that actually drives decisions

CAC in isolation is a weak metric. It only matters relative to lifetime value. A $120 CAC with $600 LTV is a great business. A $60 CAC with $80 LTV is not.

Target a minimum 3:1 LTV:CAC ratio for a healthy paid acquisition model. At 4:1 and above, you can typically afford to accelerate spend. Below 2:1, you're buying customers at a price that makes profitability difficult to achieve.