E-commerce

CAC — Customer Acquisition Cost

The total cost of acquiring one new customer, including all marketing and sales expenses.

Definition

Customer Acquisition Cost (CAC) is the total cost incurred to acquire a single new paying customer. It includes all marketing spend, sales team costs, tools, and overhead associated with the acquisition process. CAC is one of the most important metrics for determining business model viability. When evaluated alongside Customer Lifetime Value (LTV), it reveals whether your business can sustainably grow. The LTV:CAC ratio is the gold-standard health metric for subscription businesses and venture-backed startups.

Formula

CAC = Total Sales & Marketing Spend ÷ Number of New Customers Acquired

Add up all sales and marketing costs over a period, then divide by the number of new customers gained.

Example

You spend $50,000 on marketing and $20,000 on sales salaries in a quarter and acquire 700 new customers. CAC = $70,000 ÷ 700 = $100 per customer.

Key Points

CAC should always be compared to LTV — an LTV:CAC ratio of 3:1 is a common benchmark
Blended CAC includes all acquisition channels; paid CAC isolates just paid media
Reducing CAC improves profitability without requiring more revenue
CAC payback period shows how quickly a customer recoups their acquisition cost