What is Customer Acquisition Cost (CAC)?
Customer Acquisition Cost (CAC) is the total fully-loaded cost of acquiring one paying customer over a defined period. It includes sales salaries, marketing spend, ad costs, agency fees, sales tools, content production, and customer-onboarding labor: divided by the number of new customers acquired in that period.
Formula
CAC = (Sales + Marketing spend in period) / New customers acquired in period
Be explicit about whether you include only paid marketing or also organic content investment, salaries, and tooling. Investors will ask for a fully-loaded CAC; a paid-channel-only CAC understates the true cost.
CAC vs LTV: the ratio that matters
CAC alone is meaningless without LTV (Lifetime Value). Benchmark: healthy SaaS companies maintain LTV / CAC ≥ 3.0; below 1.0 means you lose money on each customer. The CAC payback period (months to recoup CAC from gross margin) should typically be ≤ 12-18 months for SMB SaaS, ≤ 24-36 months for enterprise.
By channel + by segment
Always slice CAC by acquisition channel (paid social, content/SEO, outbound, partnerships, referral) and by customer segment (SMB vs mid-market vs enterprise). Aggregated CAC hides the most actionable insight: where to double down and where to cut.
Practical implications for founders
Track CAC monthly from week 1. In investor DD, expect questions on: (1) trend over last 6 quarters, (2) by-channel breakdown, (3) CAC payback by cohort, (4) what happens if you 2x marketing spend (saturation curve). Rising CAC is normal as you saturate easy channels; the question is whether LTV is growing fast enough to maintain the ratio.
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