CAC (Customer Acquisition Cost)

The average cost of acquiring one new customer. A critical unit economics metric for any startup.

Definition

Customer Acquisition Cost (CAC) is the total cost of sales and marketing divided by the number of new customers acquired in a given period.

Formula: CAC = Total Sales & Marketing Spend ÷ Number of New Customers Acquired

Example: If you spend $10,000 on sales and marketing in a month and acquire 50 new customers, your CAC is $200.

Why CAC Matters

CAC is the foundational unit economics metric for any customer-acquisition-driven business. Without knowing your CAC, you cannot determine:

• Whether you can afford to acquire customers profitably
• How long it takes to recoup your acquisition investment
• How much capital you need to grow to a given revenue target

Components of CAC

Sales costs: Salaries, commissions, tools, travel Marketing costs: Ad spend, content production, events, agency fees

Note: You should include fully-loaded costs — salaries and overhead of the sales and marketing team, not just media spend.

Blended vs. Paid CAC

Blended CAC = total spend ÷ all new customers (including organic) Paid CAC = paid marketing spend ÷ customers from paid channels

Both are useful. Paid CAC tells you the efficiency of your paid acquisition. Blended CAC tells you the overall efficiency of your go-to-market.

CAC Payback Period

The CAC Payback Period tells you how many months it takes for a customer to generate enough gross margin to cover their acquisition cost.

Formula: CAC Payback = CAC ÷ (Monthly Revenue per Customer × Gross Margin %)

Example: CAC = $500, Monthly Revenue = $100, Gross Margin = 80%: Payback = $500 ÷ ($100 × 0.8) = 6.25 months

Investors typically look for payback periods under 12–18 months for SaaS businesses.

CAC and LTV

The LTV:CAC ratio is one of the most commonly cited unit economics metrics. A healthy SaaS business typically targets LTV ≥ 3× CAC.