CAC Ratio Calculator

The CAC ratio measures how much gross profit your new annual recurring revenue produces for every dollar you spend acquiring it. This calculator takes the new ARR you won in a period, applies your gross margin to turn that revenue into gross profit, then divides the result by your customer acquisition spend. The ratio that comes out is a sharper read on go to market return than raw revenue based measures, because it accounts for the cost of actually delivering the service rather than assuming every dollar of ARR is pure profit. Founders, finance leads and revenue operators use it to decide whether to scale spend, since a healthy CAC ratio means each dollar of acquisition is generating well more than a dollar of gross profit over the year. A ratio above one is generally encouraging, while a figure below one means you are spending more to acquire than the first year of gross profit returns, which is a flag worth investigating. To use it, enter your new ARR, your gross margin as a percentage, and your total acquisition spend for the same period. The tool returns the CAC ratio along with the gross profit on that new ARR, so you can see both the input and the result clearly. A few habits make it reliable. Use a realistic gross margin that reflects hosting, support and delivery costs rather than an optimistic headline figure. Include the full cost of acquisition, salaries, commissions, media and tools, and align the spend period with the ARR it helped win. Track the ratio over several quarters and read it next to your payback period, because together they tell you not just whether acquisition pays off but how quickly.

CAC ratio = (new ARR x gross margin) / CAC spend. Estimate only, not financial or tax advice.