Growth & SaaS
Customer acquisition cost (CAC)
Customer acquisition cost is the average sales and marketing spend needed to win one new customer.
CAC = Sales and marketing spend for the period ÷ New customers won in the period
Worked example
| Marketing spend, including ads | $90,000 |
| Sales salaries and commissions | $150,000 |
| New customers won | 40 |
($90,000 + $150,000) ÷ 40 = $6,000 per new customer
Why it matters
CAC tells you what growth really costs. Set against what a customer is worth, it shows whether spending more on sales and marketing creates value or burns it.
Common mistakes
Where it misleads
Counting only ad spend and leaving out sales salaries, commissions and tools, which usually cost more.
Dividing by all new sign-ups, including free or trial users who never pay.
Ignoring the lag between spend and the customers it wins, which distorts CAC in months when spend changes sharply.
Related terms
Keep reading
- LTV to CAC ratio (LTV:CAC)The LTV to CAC ratio compares the gross profit a customer is expected to bring in over their lifetime with the cost of acquiring them.
- CAC payback periodThe CAC payback period is the number of months it takes for a new customer’s gross profit to repay what it cost to acquire them.
- Return on ad spend (ROAS)Return on ad spend is the revenue earned for every dollar spent on advertising.
Stop calculating it by hand.
Dear CFO keeps your statements, forecasts and metrics current from the systems you already run.