Customer acquisition cost (CAC)

Sales and marketing spend in a period divided by the new customers won in that period.

DefinitionSales and marketing spend in a period divided by the new customers won in that period.

Customer acquisition cost is what it costs, on average, to win one new customer: the sales and marketing spend of a period divided by the new customers won in it. Blended CAC uses all customers, including those that arrived on their own; paid CAC uses only those from paid channels.

How it is computed

CAC = (sales spend + marketing spend in the period) / new customers won in the period. Use the same period on both sides, or lag the spend if the sales cycle is long.

Example

$480,000 of sales and marketing spend in a quarter and 160 new customers give a CAC of $3,000.

Where it goes wrong

Leaving out sales salaries, counting reactivated customers as new, or comparing a blended CAC against a competitor's paid CAC. Read it beside lifetime value: see customer acquisition cost and how to calculate LTV.

Articles that use this term

Finance metrics and formulas · SaaS

Customer acquisition cost (CAC): formula, calculator and a worked example

Customer acquisition cost is the sales and marketing cost of winning a new customer. This page gives the formula and what belongs in the cost, a small spreadsheet calculator for CAC and payback, a worked example across four channels with the weighted-average check, and the difference between blended, paid and fully loaded CAC.

Oct 1, 20266 min read Finance metrics and formulas · SaaS

Unit economics: the per-customer P&L, with LTV, CAC and payback worked for three segments

Unit economics is the profit and loss of one customer: what it pays, what it costs to serve, what it cost to win and how long it stays. This page builds the per-customer P&L for three segments of one software company, ties CAC, payback and LTV together, caps the lifetime so low churn cannot inflate it, and shows the same method for businesses without subscriptions.

Oct 1, 20268 min read