Definition
CAC (Customer Acquisition Cost) is the cost to acquire a new paying customer. It's a core unit economics metric for SaaS and subscription businesses.
Core formula
CAC = acquisition spend / new customers acquired
What costs to include
- Paid media (ad spend), agencies, creative production (if variable).
- Sales/marketing tools (CRM, email, analytics) if you include them consistently.
- Salaries/commissions: include if you want a fully-loaded CAC (recommended for planning).
How to segment CAC
- By channel (paid search, paid social, partners, outbound).
- By customer segment (SMB vs mid-market vs enterprise).
- By cohort (month acquired) to see how CAC changes with scale.
What to pair with CAC
- LTV and LTV:CAC to understand sustainability.
- Payback period to understand cash efficiency.
- Churn/retention to validate that customers stick around long enough.