CAC (Customer Acquisition Cost)

Customer Acquisition Cost (CAC) measures the total cost of acquiring a single new customer. The simple formula is total sales and marketing spend divided by the number of new customers acquired in the same period. A more nuanced "fully loaded" CAC includes sales team salaries, marketing tools, advertising spend, content creation costs, and related overhead.

CAC only matters in the context of the customer's lifetime value (LTV). The LTV:CAC ratio is the core unit economics metric. A ratio of 3:1 or higher is generally considered healthy for SaaS businesses, meaning each customer generates at least three times what it cost to acquire them. Below 1:1, the company is losing money on every customer.

CAC varies dramatically by channel and segment. Self-serve product-led growth might have a CAC of $50, while enterprise sales with a 6-month cycle might have a CAC of $50,000. The key insight is that efficient customer acquisition is a competitive advantage: a company that can acquire customers profitably at scale can reinvest those economics into faster growth.