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Unit economics

CAC (Customer Acquisition Cost)

Total sales and marketing spend in a period divided by the customers acquired in it.

Customer Acquisition Cost is fully-loaded sales and marketing spend divided by new customers:

CAC = (sales + marketing spend) รท new customers acquired

Fully loaded means salaries, commission, tooling and overhead, not just ad spend. A CAC that counts only media is a number for optimising campaigns, not for judging the business.

Blended CAC divides by all new customers; paid CAC divides only by those attributable to paid channels. Both are useful and they are not interchangeable, so state which you mean.

CAC alone says nothing. It only becomes a judgement next to LTV or, more usefully, next to CAC payback.

Related terms

  • CAC payback period How many months of gross profit from a new customer it takes to earn back what you spent acquiring them.
  • LTV (Customer Lifetime Value) The total gross profit expected from a customer across their whole relationship with you.
  • LTV:CAC ratio Lifetime value divided by acquisition cost. A rule of thumb for whether growth spending is productive.
  • Magic number Net new ARR in a quarter divided by the previous quarter sales and marketing spend. A sales-efficiency measure.