Customer Acquisition Cost (CAC)
The fully loaded cost of winning one new customer — all sales and marketing spend divided by the customers it produced.
Growth & MetricsCAC is total sales and marketing spend over a period divided by new customers acquired in it. “Fully loaded” is the word that gets quietly dropped: salaries, commissions, tooling and agency fees belong in the numerator alongside ad spend. A CAC calculated from media spend alone is typically a fraction of the real figure and makes every downstream decision wrong.
The number is only useful when segmented. Blended CAC averages a €40 self-serve signup with a €9,000 enterprise deal into a figure describing neither. Split by channel and by segment, and account for the lag — spend in one month produces customers over the following several, so dividing this month's spend by this month's customers misreads any period where spend changed.
CAC is half a metric
On its own it says nothing about whether acquisition is working. It is only meaningful against LTV — see the LTV:CAC ratio.
In practice
A SaaS company reported CAC of €310 from ad spend alone. Adding two SDR salaries, the sales tools and agency retainers took it to €1,240 against an LTV of €1,900. The channel the board had been pushing to scale was close to unprofitable and had looked like the best performer for three quarters.
Where teams get it wrong
- Counting media spend only and calling it CAC.
- Reporting blended CAC across segments with different economics.
- Ignoring the lag between spend and acquisition.
- Counting free trials or signups as customers.
- Optimising CAC down by cutting the channels that bring the highest-value customers.
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You may ask
Frequently Asked Questions
What should be included in CAC?
All sales and marketing costs for the period: ad spend, salaries and commissions for sales and marketing staff, agency fees, and the tooling those teams use. Excluding salaries is the most common way CAC gets understated.
What is a good CAC?
There is no absolute figure — it depends entirely on lifetime value. The usual benchmark is an LTV:CAC ratio of at least 3:1, with CAC recovered within about 12 months.
Related terms
All terms- Lifetime Value (LTV)The total gross profit a customer is expected to generate before they leave — the ceiling on what acquiring them can be worth.
- LTV:CAC RatioWhat a customer is worth against what they cost to acquire — the headline test of whether growth creates value.
- ARPUAverage revenue per user or account over a period — the numerator in most unit-economics calculations, and the one most often averaged badly.
- ChurnThe rate at which customers stop paying or stop using a product over a given period — the mirror image of retention.
Defined by Mara Last reviewed .
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