Definition
What is Customer Acquisition Cost (CAC)?
The total cost to acquire one new paying customer.
Customer acquisition cost (CAC) is the total sales and marketing spend divided by the number of new customers acquired in a given period. It is the primary input for evaluating the efficiency of growth spending and is compared against customer lifetime value (LTV) to determine long-term unit economics. A healthy SaaS business typically targets an LTV:CAC ratio of 3:1 or higher.
Formula
CAC = Total Sales & Marketing Spend ÷ New Customers AcquiredExample
A company spends $50,000 on sales and marketing in a month and acquires 200 new customers. CAC = $50,000 ÷ 200 = $250.