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Get a clear, practical guide to customer acquisition cost amortization and learn how to track CAC accurately for smarter, more sustainable business growth.
If you’ve ever winced at your financial reports after a big marketing push, you know the feeling. A massive expense for a trade show or an annual software subscription can make an otherwise great month look like a disaster, completely skewing your profitability. This financial whiplash makes it nearly impossible to gauge the true return on your investment. The solution isn't to stop spending, but to account for it more intelligently. This is where customer acquisition cost amortization comes in. It’s a strategic accounting method that smooths out these large, one-time expenses over the entire period they generate value, giving you a stable, accurate picture of your company’s health.
Think of Customer Acquisition Cost (CAC) as the total price you pay to win over a new customer. It’s a straightforward but powerful metric that answers a critical question: How much does it cost to get one person to click "buy"? While it's a popular metric in the SaaS world, any business can—and should—use it to understand its marketing and sales effectiveness. Calculating your CAC helps you see exactly where your money is going and whether your efforts are paying off in the form of new, happy customers.
Tracking your CAC is about more than just crunching numbers; it’s about making smarter decisions for your business. When you know how much it costs to acquire a customer, you can allocate your budget more effectively and invest in the channels that give you the best return. This metric is also a key indicator of your company's health and scalability. If your acquisition costs are too high, it can signal that your business model isn't sustainable in the long run. On the other hand, a healthy CAC shows potential investors that you have a solid plan for profitable growth, making your business a more attractive opportunity.
To get an accurate CAC, you need to look beyond just your ad spend. The true cost includes all the sales and marketing expenses that go into attracting new customers over a specific period. This means factoring in everything from salaries for your sales and marketing teams to software subscriptions, ad campaigns, and even one-time costs like attending a trade show. For those larger, upfront expenses, it’s often better to spread the cost out over the time you expect to see returns—a process called amortization. This gives you a more realistic picture of your monthly CAC instead of a single, misleading spike.
Your CAC doesn’t tell the whole story on its own. Its real power comes from comparing it to your Customer Lifetime Value (CLV), which is the total revenue you expect to generate from a single customer. This relationship shows whether your acquisition strategy is actually profitable. If your CAC is consistently lower than your CLV, you’re in a great spot—it means you’re spending less to acquire customers than they’re worth to your business. A healthy ratio, often cited as 3:1 (CLV to CAC), is a strong sign that your business is building a sustainable and profitable customer base. You can find more helpful articles on our HubiFi Blog to guide your financial strategy.
Think of CAC amortization as a way to smooth out your customer acquisition costs over time. Instead of recording a large marketing expense in a single month—like the cost of a major trade show or an annual software subscription—you spread that expense across the entire period it’s expected to bring in new customers. It’s the same principle accountants use for big-ticket assets. You wouldn't expense an entire factory in one year; you'd depreciate it over its useful life. Similarly, amortizing CAC gives you a more realistic picture of your marketing spend and its true return on investment.
This method moves you away from the financial peaks and valleys that come with large, one-off expenses. By matching costs to the periods they generate value, you get a clearer, more consistent view of your company's performance. This isn't just an accounting trick; it's a strategic approach to financial reporting that provides deeper insights into your business's health. It helps you understand how your acquisition efforts pay off over several months or even years, rather than just looking at a single, potentially misleading, monthly snapshot. This clarity is essential for making smarter, data-driven decisions about where to invest your marketing dollars for sustainable growth.
The main reason to amortize your CAC is for accuracy. Let's say you spend $20,000 on a booth at an industry conference in February. That event might generate leads and new customers for the next six months. If you log the entire $20,000 as a February expense, your CAC for that month will look alarmingly high, while the following months will seem artificially profitable. This skews your financial data and makes it difficult to judge the true effectiveness of the conference. By spreading that cost over the six months it’s generating value, you get a much more accurate view of your return on investment for that specific campaign and a truer CAC for each month.
When you have a more accurate representation of your CAC, you can make much better decisions. Spreading out acquisition costs helps with more effective financial planning and resource allocation. You can confidently assess which marketing channels are truly performing well over the long term, not just in the month you paid the bill. This clarity allows you to allocate your budget more strategically, doubling down on what works and cutting back on what doesn't. This level of clarity often requires robust integrations between your financial and marketing platforms to ensure all data is captured correctly. It also provides a more stable and predictable view of your profitability, which is invaluable for internal planning and for building trust with investors.
You should consider amortizing any significant acquisition cost that is expected to generate customers over an extended period. The trade show example is a classic case, but it applies to many other scenarios. Think about upfront costs for a major SEO or content marketing initiative that will pay dividends for a year or more. Another example is the annual subscription fee for a key piece of marketing automation software. If the benefit isn't immediate and isolated to a single month, you have a strong case for amortization. The goal is to align the expense with the revenue it helps create, giving you a clearer line of sight into your company's financial performance.
Calculating your amortized Customer Acquisition Cost (CAC) might sound complicated, but it’s really about getting a more honest look at your spending. When you make a big investment—like sponsoring a major trade show or launching a huge digital campaign—the costs hit your books all at once. But the customers you gain from that effort will likely trickle in over several months. If you attribute the entire cost to the month you paid the bill, your CAC for that period will be sky-high, giving you a distorted view of your marketing performance.
Amortizing your CAC smooths out these large, upfront expenses over the entire period they are expected to generate new customers. This approach gives you a more stable and realistic metric that reflects the true return on your investment over time. It helps you make smarter decisions about where to put your marketing dollars and provides a clearer picture of your company’s financial health to stakeholders and potential investors. Think of it as moving from a snapshot to a time-lapse video; you see the full story of how your investments pay off, not just a single, potentially misleading moment. With the right data consultation, you can set up a system that makes this process straightforward.
Before you can amortize, you need to master the fundamental Customer Acquisition Cost formula. At its core, the calculation is simple: divide your total sales and marketing costs for a specific period by the number of new customers you acquired in that same period. This gives you a baseline figure for how much you’re spending, on average, to win over each new customer.
Your sales and marketing costs should include everything you spend to attract leads and convert them. This means salaries for your team, advertising spend, software subscriptions, agency fees, and any other related overhead. The key is to be thorough. A clear CAC policy ensures you capture all relevant expenses, giving you a reliable starting point for any further analysis.
Now, let’s add the amortization layer. This step is for significant, one-time costs that have a long-term impact. Imagine you spend $24,000 on a booth at an annual industry conference. You know the leads and brand awareness from that event will likely convert into customers over the next 12 months. Instead of booking a $24,000 expense in the month of the conference, you amortize it.
You would spread that cost across the 12-month benefit period, adding $2,000 ($24,000 / 12) to your monthly marketing expenses. This method prevents a single month’s CAC from looking artificially high and gives you a more accurate reflection of your ongoing acquisition efforts. It’s a way to match expenses to the revenue they help generate, which is a core principle of sound accounting.
Deciding on the right amortization period is a critical step that requires some strategic thinking. The goal is to align the cost with the timeframe you realistically expect to see customers from that specific investment. There’s no one-size-fits-all answer; the period should be based on your sales cycle, industry norms, and historical data. For a trade show, 12 months might be appropriate. For a piece of evergreen content, you might choose a longer period.
The key is to be consistent and have a clear rationale for your choice. This isn't just a guess—it's an informed estimate that directly impacts the accuracy of your CAC. Documenting your reasoning will help you explain your financials to your team and investors and ensures you can refine your approach as you gather more insights into your marketing performance.
When you amortize acquisition costs, you’re changing how they appear on your financial statements. Instead of a single large expense, you’ll see a smaller, recurring expense on your income statement for each month of the amortization period. This is recorded as an amortization expense, which helps smooth out your profitability over time.
This approach presents a more stable and predictable financial picture, which is incredibly valuable for internal planning and external reporting. It demonstrates a sophisticated understanding of your business drivers and helps you pass audits with greater ease. By accurately reflecting how your investments translate into long-term value, you can make more confident strategic decisions and showcase the sustainable growth of your business.
Calculating your Customer Acquisition Cost is a great first step, but that number doesn't tell the whole story on its own. To truly understand the health and sustainability of your business, you need to view CAC as part of a bigger picture. Think of it as one instrument in an orchestra; it sounds fine alone, but its real power is revealed when you hear it with the other instruments. Tracking CAC alongside other key financial metrics gives you a more complete view of your performance, helping you make smarter decisions about your budget, marketing efforts, and overall growth strategy.
When you analyze CAC in context, you can answer much more important questions. Are the customers you’re acquiring actually profitable in the long run? How quickly do you earn back your initial investment? Is your revenue growing steadily, or are you just replacing customers who leave? Looking at these interconnected metrics helps you move beyond a simple cost calculation and toward a sophisticated understanding of your business's financial engine. This holistic approach is what separates businesses that merely survive from those that thrive. It allows you to fine-tune your strategies, ensuring that every dollar spent on acquisition contributes to long-term, profitable growth instead of just short-term gains. For more on building a strong financial foundation, you can find additional Insights on the HubiFi blog.
Customer Lifetime Value (CLV) is the total amount of money you can reasonably expect to earn from a single customer throughout their entire relationship with your company. It’s a forward-looking metric that shifts the focus from a one-time transaction to the long-term health of your customer base. By comparing what you spend to acquire a customer (CAC) with what they’re worth over time (CLV), you can quickly see if your acquisition strategy is actually profitable. A high CLV means your customers stick around and continue to spend, which is exactly what you want for sustainable growth.
Once you know your CAC and CLV, you can put them together to find your LTV:CAC ratio. This simple calculation is one of the most powerful indicators of your business's health. Ideally, you want a ratio of at least 3:1, meaning for every dollar you spend on acquiring a customer, you generate three dollars in lifetime value. If your ratio is closer to 1:1, you’re essentially breaking even on each customer, which isn’t sustainable. A healthy LTV:CAC ratio shows that your marketing is efficient and you’re acquiring profitable customers.
The CAC Payback Period tells you exactly how many months it takes to earn back the money you spent to acquire a new customer. A shorter payback period is always better, as it means you recoup your investment faster and can reinvest that cash back into your business. For example, if your CAC is $300 and your customer pays you $50 per month, your payback period is six months. This metric is crucial for managing cash flow, especially for early-stage or high-growth companies where capital is tight. Tracking your CAC Payback Period helps you scale responsibly.
For any subscription-based business, Monthly Recurring Revenue (MRR) is the lifeblood. It’s the predictable revenue you can expect to receive every month from your customers. Tracking MRR alongside CAC helps you see the immediate impact of your acquisition efforts on your top-line growth. As you bring in new customers, your MRR should climb. If you’re spending on acquisition but your MRR is flat or declining, it could be a red flag that you have a retention problem that needs to be addressed before you spend any more on marketing.
Churn rate—the percentage of customers who cancel or don’t renew their subscriptions—can quietly undermine your acquisition efforts. A high churn rate means you’re constantly trying to fill a leaky bucket; you have to acquire more new customers just to replace the ones you’ve lost. This churn directly impacts your CAC effectiveness because it shortens the customer lifetime, reducing the CLV you can generate from each acquisition. Keeping a close eye on churn helps you understand the true return on your CAC and highlights the importance of investing in customer retention strategies.
Tracking and amortizing your Customer Acquisition Cost effectively requires more than just a spreadsheet. To get a clear and accurate picture, you need a set of tools that work together to connect your marketing spend to your financial data. When your systems are in sync, you can move beyond simple calculations and start making strategic decisions based on a true understanding of what it costs to acquire a customer and how that investment pays off over time.
A well-rounded tech stack for managing CAC typically includes solutions for analytics, revenue recognition, and accounting, all tied together with automation. These tools help you gather the right data, apply your amortization rules consistently, and report on the results without spending hours on manual data entry. This setup not only ensures your financials are accurate and compliant but also gives you the insights needed to refine your marketing strategies and grow your business profitably. By investing in the right technology, you can turn CAC from a simple metric into a powerful lever for strategic planning and financial health. HubiFi specializes in creating these connections, offering integrations that bring your disparate data sources together for a unified view of your financial performance.
You can't improve what you can't measure, and that’s where analytics and reporting tools come in. These platforms are essential for pulling data from all your marketing channels—like social media ads, search campaigns, and email marketing—and consolidating it in one place. They allow you to visualize your CAC metrics through dashboards and reports, making it easier to spot trends and understand which channels are performing best. With clear data visualization from strong marketing analytics, you can make informed, data-driven decisions to optimize your marketing spend and improve your overall customer acquisition efficiency. This visibility is the first step toward building a more effective and cost-conscious acquisition strategy.
Understanding your acquisition cost is only one piece of the puzzle. To see the full picture, you need to connect that cost to the revenue each customer generates over their lifetime. This is where revenue recognition platforms become critical. By integrating CAC with revenue data, these systems help you accurately assess the long-term value of your customers. This is especially important for businesses with subscription models or complex contracts, as it ensures you recognize revenue correctly over time according to standards like ASC 606. This connection allows you to make smarter decisions about your marketing investments, ensuring you’re not just acquiring customers, but profitable ones.
To truly master your CAC, you need to break down the walls between your marketing and finance departments. Integrating your acquisition data directly with your accounting software creates a seamless flow of financial information. This ensures that your marketing expenses are perfectly aligned with the revenue generated from new customers, giving you a much clearer picture of profitability. When your systems are connected, you can accurately calculate some of the most important customer acquisition metrics without manual reconciliation. This single source of truth simplifies audits, streamlines financial reporting, and gives everyone in the organization confidence in the numbers.
Manually collecting data from different platforms to calculate and amortize CAC is not only tedious but also leaves room for human error. The right automation capabilities built into modern software can handle this heavy lifting for you. By automating data collection, cost allocation, and reporting processes, you can significantly reduce manual work and ensure greater accuracy in your calculations. This frees up your team from the grind of data entry and allows them to focus on more strategic initiatives, like analyzing performance and finding new ways to lower your CAC. Automation turns a complex, time-consuming task into a streamlined, reliable process.
While amortizing your Customer Acquisition Cost is a powerful financial strategy, it’s not always a straightforward process. Getting it right means navigating a few common hurdles that can trip up even the most diligent finance teams. From wrangling complex cost data and making accurate long-term predictions to making sure your systems can keep up, each step presents its own set of challenges. You might find yourself struggling to allocate costs from a single event over multiple months or trying to pin down exactly how long a new customer will stick around.
These aren't just minor accounting headaches; they can directly impact your understanding of profitability and guide your spending in the wrong direction. An inaccurate amortization schedule can make a losing marketing campaign look like a winner, or vice versa. It can obscure cash flow issues and lead to poor strategic decisions that take months to correct. Understanding these common pitfalls is the first step toward building a reliable and insightful financial process. Let’s walk through the main obstacles you might face and how to think about them clearly.
One of the trickiest parts of amortization is figuring out how to spread a single, large cost over time. Imagine you invest in a booth at a major industry trade show. That expense hits your bank account in one lump sum, but the customers you gain from it will likely sign up over the next several months. If you record the entire cost in the month of the event, your financials for that month will look grim. Proper cost allocation requires you to distribute that expense across the entire period you expect to see returns, giving you a much more accurate picture of the event’s true profitability and its impact on your CAC.
Your amortization period is directly tied to how long you expect a customer to stay with you. But what if you don’t know that number? Accurately estimating customer lifespan is a major challenge, especially for newer businesses without years of historical data. This estimate is the foundation for calculating Customer Lifetime Value (CLV), a critical metric for gauging profitability. If your lifespan estimate is too optimistic, you’ll spread your acquisition costs too thin, making your CAC appear lower than it really is. This can lead to poor spending decisions based on a flawed understanding of your unit economics. Getting this right is fundamental to a sound amortization strategy.
Manually tracking amortization schedules in spreadsheets is a recipe for headaches and human error. As your business grows, you need a system that can handle this complexity automatically. The challenge lies in finding a solution that can record the amortized expense each period without manual intervention. This process needs to be seamlessly connected to your core accounting software and other financial tools. This is where having robust integrations with your existing platforms is non-negotiable. Without them, your finance team will spend countless hours on manual data entry and reconciliation, pulling their focus away from more strategic work.
It’s easy to remember the big, direct costs of customer acquisition, like your ad spend. But what about the indirect costs? These are the expenses that support your marketing and sales efforts but aren't tied to a specific campaign, such as a portion of your marketing team’s salaries, software subscriptions for your CRM, or overhead for the sales department. Forgetting to include these costs will give you an incomplete and misleadingly low CAC. A truly accurate calculation requires a thorough process for identifying and allocating every single expense that contributes to winning a new customer, no matter how small or indirect it may seem.
Many businesses experience seasonal peaks and valleys in their marketing efforts. You might spend a significant portion of your annual budget on a Black Friday campaign, for example. If you recognize that entire expense in November, it will drastically skew your monthly performance metrics. That month’s CAC will look sky-high, while the following months—which are still benefiting from the campaign’s momentum—will appear unusually profitable. Amortizing these seasonal costs allows you to smooth out these variations. By spreading the expense over the entire period the campaign generates customers, you get a more balanced and realistic view of your marketing ROI throughout the year.
Getting your CAC amortization right is less about complex math and more about having solid, consistent processes. When your numbers are accurate, you can trust them to guide your spending and strategy. Here’s how to build a reliable system for tracking and amortizing your customer acquisition costs.
Think of a CAC policy as your company’s rulebook for this metric. It’s a simple document that clearly states which expenses you include in your CAC calculation and why. This isn't just for you—it ensures everyone from your marketing team to your sales department calculates CAC the same way. When you present your numbers to investors or board members, you’ll have a clear, logical explanation for them. This document removes guesswork and creates a single source of truth, making your financial reporting more consistent and trustworthy. A clear policy is the foundation for accurate amortization and helps you make smarter decisions based on data you can stand behind.
To get an accurate CAC, you need to account for every penny spent on acquiring new customers. This includes the obvious marketing and sales salaries, ad spend, and commissions. But don't forget the smaller, indirect costs like software subscriptions for your sales team or the cost of content creation. Missing these details can make your CAC seem lower than it is, leading to poor budget decisions. Using a platform with robust integrations can help you pull data from all your different systems—your CRM, accounting software, and marketing platforms—to make sure nothing slips through the cracks. Consistent data collection is the only way to get a true picture of your acquisition spending.
Your business isn’t static, and neither are your costs. What worked for your CAC calculation six months ago might not be accurate today. That’s why it’s so important to set a schedule for reviewing your CAC policy and calculations. I recommend doing this quarterly or at least twice a year. These regular check-ins allow you to adjust for new marketing channels, changes in your sales team structure, or shifts in strategy. Proactively analyzing your CAC helps you ensure your calculations stay relevant and precise as your business evolves. It’s a simple habit that keeps your financial metrics sharp and your strategy on point.
Not all acquisition costs deliver results in the same month you pay for them. For example, if you spend a large sum on a booth at a trade show in January, you’ll likely be getting leads and new customers from that event for months to come. Lumping the entire expense into January’s CAC would make that month look incredibly inefficient. Instead, you should spread that cost over the entire period you expect to see returns. This method, known as amortization, gives you a much more realistic view of your monthly CAC and the true return on investment of your marketing efforts.
It’s crucial to understand how CAC fits into your broader financial reporting. For official accounting purposes under standards like ASC 606, most customer acquisition costs must be expensed in the period they occur. However, for your internal analysis and strategic planning, amortizing these costs often provides a more insightful view of performance over time. Your financial system needs to be flexible enough to handle both. This ensures you can maintain compliance in your financial statements while still using amortized CAC to make informed decisions about your growth strategy. This dual approach gives you the best of both worlds: compliance and clarity.
Optimizing your Customer Acquisition Cost (CAC) is about more than just cutting your marketing budget. It’s about making smarter, data-driven decisions that fuel sustainable growth. By refining how you allocate costs, manage revenue, and plan for the future, you can build a more efficient and profitable acquisition engine. An optimized strategy gives you a clear view of what’s working, allowing you to invest confidently in the channels that deliver the best customers. It all starts with treating CAC not as a simple expense, but as a strategic investment in your company’s future.
Getting your cost allocation right is the first step toward an accurate CAC. Instead of booking a large marketing expense in a single month, you should amortize costs over the period they are expected to generate customers. For example, the cost of a major trade show shouldn't hit your books all at once. Instead, spread that expense across the several months you anticipate signing up new clients from the event. This approach gives you a much more realistic view of your return on investment and prevents one-off campaigns from skewing your monthly profitability reports. It’s a simple shift that brings incredible clarity to your financial insights.
Your CAC and revenue recognition processes are deeply connected. A clear understanding of how customer acquisition costs impact your business is essential for accurate financial reporting. When you know precisely what it costs to acquire different types of customers, you can better forecast profitability and align your books with accounting standards like ASC 606. Improving your revenue recognition process ensures that the revenue you earn from these newly acquired customers is recorded correctly, giving you a true measure of your company’s financial health and the success of your acquisition strategies.
Amortizing your acquisition costs can have a major positive impact on your cash flow management. When you spread large, upfront costs over time, you create a more predictable and stable financial picture. Think of it this way: amortization of acquisition costs is an expense that your company records each period, showing how acquisition investments are used up over time. This prevents your financial reports from showing a sudden, sharp dip in profitability just because you launched a big campaign. This stability makes it easier to budget, forecast, and manage your cash flow without the dramatic peaks and valleys caused by large, one-time expenses.
A smart CAC strategy is always focused on the long game. The goal isn’t just to acquire customers cheaply; it’s to acquire the right customers who will deliver value over time. This is where the relationship between CAC and Customer Lifetime Value (CLV) becomes critical. If your CAC is consistently lower than your CLV, your business is on a healthy, sustainable path. Amortizing your CAC helps you see this long-term value more clearly, allowing you to justify higher acquisition spending for customers who promise greater lifetime returns. This forward-looking approach is fundamental to building a resilient, long-term business.
You can’t optimize what you can’t measure accurately. To truly get a handle on your amortized CAC and other key metrics, you need the right systems in place. Relying on spreadsheets and manual calculations is risky and simply won’t scale. Effective dashboard solutions and automated platforms are essential for data-driven growth. By using a system that integrates your sales, marketing, and financial data, you can monitor performance in real-time and make adjustments quickly. The right tools give you the confidence to make strategic decisions that will guide your company’s growth.
As your business expands, the simple methods you used to track customer acquisition costs might not keep up. A growing company means more marketing channels, larger budgets, and complex customer journeys. To maintain profitability, your approach to managing CAC needs to evolve. It’s not just about calculating a number; it’s about building a scalable system that supports smart, sustainable growth and provides a clear view of your marketing return on investment.
Your initial CAC strategy was likely straightforward, but scaling requires more nuance. As you invest in longer-term marketing efforts, like attending a major trade show or launching a brand campaign, you need to adjust how you attribute costs. Instead of assigning the entire expense to a single month, you should amortize it over the period you expect to see results. This gives you a more accurate picture of your marketing ROI. Understanding how customer acquisition costs affect your business is key to adapting your strategy as you scale, ensuring your financial reporting reflects the true performance of your investments.
Effective CAC management is an ongoing process, not a one-time task. By regularly analyzing your CAC, you can identify which channels and campaigns are performing best and reallocate your budget accordingly. For example, one company managed to decrease its CAC by 25% simply by using this data to make smarter spending decisions. Set up a routine to review your metrics, test new approaches, and refine your strategy. This creates a powerful feedback loop that helps you consistently improve your acquisition efforts and get more from every dollar you spend on marketing KPIs.
Ultimately, the goal is to build a CAC management strategy that supports long-term, profitable growth. This means looking beyond immediate costs and focusing on acquiring high-value customers efficiently. Your CAC has a direct impact on your company’s profitability, so it must be managed with a strategic mindset. A durable strategy involves setting clear goals, consistently tracking performance, and using accurate data to inform your decisions. By performing a regular customer acquisition cost analysis, you can optimize your marketing spend and build a foundation for sustainable success.
Is amortizing CAC something only big companies need to worry about? Not at all. Amortizing your acquisition costs is about getting an honest look at your marketing performance, regardless of your company's size. If you make any significant investment that you expect to bring in customers over several months—like sponsoring a local event or buying an annual software subscription—amortization gives you a truer picture of your profitability. It helps you avoid making bad decisions based on a single month of skewed data.
What's the most common mistake people make when calculating CAC? The biggest mistake is forgetting to include all the costs. It’s easy to remember your ad spend, but many people overlook the indirect expenses that support their sales and marketing efforts. This includes a portion of your team's salaries, software subscriptions, and other related overhead. Leaving these out will give you a CAC that looks great on paper but isn't based in reality, which can lead to poor spending decisions down the line.
How do I choose the right amortization period for a marketing expense? This is more of an art than a science, but it should always be an educated decision. The goal is to match the expense to the period you realistically expect to benefit from it. Look at your historical data. How long does it typically take for leads from a similar campaign to convert into customers? For a big trade show, a 12-month period might make sense. For a digital campaign, it could be shorter. The key is to have a clear reason for your choice and to apply it consistently.
Can I use amortized CAC for my official financial statements? This is a great question because it highlights an important distinction. For your internal reporting and strategic planning, amortized CAC is incredibly valuable for understanding performance over time. However, for official accounting purposes under standards like ASC 606, most acquisition costs must be expensed in the period they occur. Your financial system should be flexible enough to handle both, giving you compliant external reports and insightful internal ones.
My CAC seems really high. What's the first thing I should do? Before you panic or slash your budget, put that number in context. The first step is to compare your CAC to your Customer Lifetime Value (CLV). If your CLV is still significantly higher than your CAC—a 3:1 ratio is a good benchmark—you might be in a healthier position than you think. If the ratio is unhealthy, then it's time to dig into which specific marketing channels are driving up your costs and re-evaluate your spending there.
Former Root, EVP of Finance/Data at multiple FinTech startups
Jason Kyle Berwanger: An accomplished two-time entrepreneur, polyglot in finance, data & tech with 15 years of expertise. Builder, practitioner, leader—pioneering multiple ERP implementations and data solutions. Catalyst behind a 6% gross margin improvement with a sub-90-day IPO at Root insurance, powered by his vision & platform. Having held virtually every role from accountant to finance systems to finance exec, he brings a rare and noteworthy perspective in rethinking the finance tooling landscape.
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