Customer Acquisition Cost (CAC)

What is Customer Acquisition Cost (CAC)?

Customer Acquisition Cost (CAC) is the total cost associated with acquiring a new customer, including all marketing, sales, and related expenses. It's a key metric for measuring the efficiency of your go-to-market efforts.

Understanding CAC helps businesses determine how much they can profitably invest in growth and whether their sales and marketing strategies are sustainable.

How to Calculate CAC

CAC Formula:

CAC = (Total Sales & Marketing Costs) ÷ Number of New Customers Acquired

What to Include in CAC:

• Marketing spend (ads, content, events)
• Sales team salaries and commissions
• Sales and marketing tools/software
• Agency and contractor costs
• Overhead allocated to sales/marketing

Example:

Total S&M Spend: $500,000
New Customers: 100

CAC = $500,000 ÷ 100 = $5,000 per customer

CAC Payback Period

How long it takes to recoup your acquisition investment:

CAC Payback = CAC ÷ (ARPU × Gross Margin)

• Good: 12 months or less
• Acceptable: 12-18 months
• Concerning: 18+ months

Blended vs. Paid CAC

Blended CAC: Includes all customers (organic + paid)

Paid CAC: Only customers from paid channels

Both are useful—blended shows overall efficiency, paid shows marketing ROI.