Customer Acquisition Cost(CAC)
Total cost to acquire one new paying customer.
Customer Acquisition Cost is the all-in cost of acquiring one new customer, including paid advertising, sales salaries, marketing tools, content production, and any other sales or marketing expense over a given period, divided by the number of new customers acquired in that period. It's one of the two most important numbers in any business, paired with Lifetime Value.
A healthy CAC depends on your business model. SaaS companies typically aim for a CAC payback period under 12 months. Local services often need CAC at 10-20% of first-year revenue. E-commerce DTC brands generally aim for CAC at 25-35% of first-purchase revenue, with profitability coming from repeat purchases.
The biggest mistake businesses make is calculating CAC at the channel level (e.g. 'Google Ads CAC') rather than blended across all channels including organic, brand, and referral. Channel-level CAC is useful for optimization; blended CAC is the truth.
CAC = (Total Sales + Marketing Costs) / Number of New Customers AcquiredA SaaS company spends $50,000 on sales and marketing in a month and signs 25 new customers. CAC = $50,000 / 25 = $2,000.
Frequently asked questions
Should I include salaries in CAC?
Yes — fully-loaded CAC includes sales and marketing salaries, tools, paid ad spend, content costs, and agency fees. Many companies hide CAC by excluding salaries, which makes their unit economics look better than they are.
What's a good CAC?
Depends entirely on your LTV. The ratio LTV:CAC matters more than the absolute number. Generally LTV:CAC of 3:1 or higher is healthy for SaaS, while local service businesses can sustain ratios as low as 2:1 if payback is fast.
Related terms
Total revenue (or profit) a customer generates over the entire relationship.
How long it takes to recover the cost of acquiring a customer.
The ratio of customer lifetime value to customer acquisition cost.
Revenue generated per dollar of advertising spend.
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