Customer Acquisition Cost (CAC)

What Is Customer Acquisition Cost (CAC)?

CAC (Customer Acquisition Cost) measures how much you spend to acquire each customer. Calculate it by dividing total marketing and sales spend by number of new customers acquired. For example, if you spend $10,000 on marketing and acquire 100 customers, your CAC is $100 per customer. This metric is fundamental to unit economics.

CAC must be balanced against customer lifetime value (LTV): if you spend $100 to acquire a customer who generates $500 in lifetime revenue, that's healthy (5:1 ratio); if you spend $500 to acquire a $100 customer, that's unsustainable. Venture-backed companies often prioritize growth over profitability, accepting high CAC for market share, but even they watch CAC: improving CAC increases profitability without hurting growth.

CAC varies dramatically: enterprise sales have high CAC (complex, long sales cycles) but high LTV; consumer products have low CAC (viral, word-of-mouth) but lower LTV. Improving CAC—through product virality, better targeting, or optimized sales—is a key lever for business health.