CAC
Also: CAC, Customer Acquisition Cost, Cost of Customer Acquisition, COCA, Coût d'acquisition client, CAC unitaire
Customer Acquisition Cost: total sales and marketing spend divided by the number of new customers acquired over the same period.
What it is
Customer Acquisition Cost (CAC) measures how much a business spends, on average, to win one new customer. The basic formula is:
CAC = (total sales and marketing spend) / (number of new customers acquired) over the same period.
The numerator typically includes advertising spend, salaries and commissions for sales and marketing teams, agency and tooling costs, and creative production. The denominator counts only genuinely new customers acquired in that window, not renewals or upsells.
Why it matters
CAC is one of the core unit economics metrics. It tells you whether growth is affordable and sustainable.
- Profitability signal: if CAC exceeds the value a customer generates, growth destroys value.
- Efficiency benchmark: comparing CAC across channels shows where marketing money works hardest.
- Investor scrutiny: CAC, alongside LTV and payback period, is a standard due diligence metric.
CAC is most meaningful when paired with Customer Lifetime Value (LTV). A healthy LTV:CAC ratio is often cited around 3:1, though this varies by industry. Another key companion is CAC payback period: how many months of gross margin are needed to recover the acquisition cost.
How it is used in practice
- Blended vs paid CAC: blended CAC divides all spend by all new customers (including organic); paid CAC isolates customers won through paid channels. Report both to avoid flattering yourself with organic wins.
- Segment by channel and cohort: track CAC per channel (search, social, events, outbound) to reallocate budget.
- Choose the right window: acquisition spend and the resulting customers often lag, so align periods carefully.
- Decide what counts as spend: be explicit about whether salaries, overhead, and tooling are included, and stay consistent.
Worked example
A B2B SaaS company spends the following in one quarter:
- Paid ads: 120,000
- Sales and marketing salaries: 180,000
- Tooling and agency fees: 30,000
Total spend = 330,000. They acquire 150 new customers.
CAC = 330,000 / 150 = 2,200 per customer.
If each customer contributes 900 in annual gross margin and stays 4 years, LTV is 3,600. The LTV:CAC ratio is 3,600 / 2,200 = 1.6:1, below the common 3:1 target. The payback period is 2,200 / (900/12) = about 29 months. This suggests acquisition is too expensive relative to value, prompting the team to cut inefficient channels or raise retention.
See also
Frequently asked questions
What does CAC stand for and how is it calculated?
CAC means Customer Acquisition Cost: the average amount spent to win one new customer. The formula is total sales and marketing spend divided by the number of new customers acquired over the same period. The numerator usually covers advertising, sales and marketing salaries and commissions, agency and tooling fees, and creative production; the denominator counts only genuinely new customers, not renewals or upsells.
What is the difference between blended CAC and paid CAC?
Blended CAC divides all acquisition spend by all new customers, including those who arrived organically. Paid CAC isolates only the customers won through paid channels. Reporting both avoids the trap of letting organic wins flatter the efficiency of paid spend.
What is a good LTV:CAC ratio?
A ratio around 3:1 is the figure most often cited, meaning a customer generates three times what it cost to acquire them. It varies by industry and should not be treated as a universal threshold. Below that level, acquisition is usually too expensive relative to the value each customer brings.
How is the CAC payback period calculated and why does it matter?
CAC payback period is the acquisition cost divided by the monthly gross margin per customer, giving the number of months needed to recover what was spent. Example: a CAC of 2,200 with 900 of annual gross margin per customer gives 2,200 / (900/12), roughly 29 months. The longer the payback, the more cash is tied up before growth funds itself.
Which decisions should I revisit when my CAC is too high?
Two levers: cut the channels where acquisition costs most, or raise retention so each customer generates more value. Segmenting CAC by channel and by cohort shows where the budget actually works before reallocating it. Also check the calculation itself: an ill-defined window or an inconsistent definition of what counts as spend can distort the figure.