How Do I Calculate CAC for a New Business? 5 Steps to Set Your First Marketing Budget

If you’ve ever tried to set a marketing budget for a brand-new business, you’ve probably hit this wall:

How do I know what I can afford to spend to acquire a customer if I don’t know what it costs to get one yet?

It’s the classic chicken and egg problem. You need to spend money to get customers so you can calculate CAC for a new business and figure out what growth really costs.

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Quick reminder: What’s CAC again? CAC is just the average cost of winning a new customer. If you spend $500 on ads and bring in 10 new customers, your CAC is $50. Why it matters: If you don’t track this, you’ll have no idea if your marketing is profitable or just burning cash.

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So how do you move forward when you don’t have the numbers yet? You don’t sit still. You work with the numbers you do know, run small tests, and learn as you go.

👉 5 Steps to Calculate CAC for a New Business and Set Your First Marketing Budget

Step 1: Start with the numbers you know

Even if you don’t know CAC yet, you do know a few basics:

• Average Order Value (AOV): how much a typical customer spends

• Your product costs

• Your gross margin (what’s left after costs)

From here, set a first CAC target. A safe place to start is 25 to 35 percent of AOV.

Step 2: Set a realistic target

If your AOV is $100 and your costs are $30, your margin is $70. That makes $25 to $35 a good CAC target if you’re trying to calculate CAC for a new business without any history to go on. It’s not perfect math, but it gives you a number to work with instead of guessing.

Step 3: Reality check the market

New websites rarely convert at more than 1 percent in the beginning. That means you’ll need a lot of visitors to land a single sale.

Here’s the quick formula: Max CPC = Target CAC × Conversion Rate

So if your target CAC is $30 and your site converts at 1 percent, you can afford $0.30 per click. If ads for your audience are running closer to $1.50 a click, you’ve got two choices: work on boosting your conversion rate or raise your CAC target.

Step 4: Budget for learning, not profit

Your first three months of marketing aren’t about big wins. They’re about figuring out what works. Many new brands test with $5K to $15K per month. If you’re tighter on cash, scale down, but make sure you’re spending enough to get useful data.

A simple split looks like this:

• 60 percent on paid social like Instagram, TikTok, Facebook

• 20 percent on influencer seeding

• 20 percent on search ads

Think of this as tuition. You’re paying to learn, not just to sell.

Step 5: Track, measure, and adjust

Let’s say you spend $10K (wouldn't that be nice!) and bring in 125 customers. That’s an $80 CAC. If your goal was $30, don’t panic. Now you’ve got data. The next move is trimming what’s wasteful, doubling down where you see traction, and making your website work harder.

Takeaway

Don’t pressure yourself to nail this on day one. The point is to learn fast, waste less, and make progress each month as you calculate CAC for a new business and bring it closer to a sustainable level.

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👉 Use this ChatGPT prompt to calculate CAC and plan your first marketing budget:

I’m starting a new brand and I want help setting a first marketing budget.

Here are my numbers:

- Average order value (AOV): [fill in your number]

- Product costs (COGS): [fill in your number]

- Monthly marketing budget I can test with: [fill in your number]

Here’s what I want you to do:

1. Calculate my gross margin and suggest a target CAC (as 25–35% of AOV).

2. Show me how many customers I could expect to acquire if I spend my test budget at that CAC.

3. Estimate how many website visitors I would need, assuming a 1% conversion rate.

4. Tell me what maximum cost-per-click (CPC) I can afford.

5. Suggest how to split my test budget across paid social, influencers, and search ads.

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Copy, paste, and plug in your numbers. You’ll walk away with a starting point that’s clear and specific to your business.

Next up in this series: we’ll dig into real-world CAC benchmarks so you know what’s “normal” and how to avoid sticker shock when you see the actual numbers.

Want more help like this? Join our small business community at Ready Plan Grow, where we share tools, training, and real talk to help you work smarter, save time, and lower risk.

You’ve shown you are READY to build your business. Now let’s PLAN and GROW!