marketing
CAC (Customer Acquisition Cost)
What it costs to acquire one paying customer, including every cost.
Definition
CAC is total acquisition spend divided by new customers acquired in the period. Total spend must include EVERYTHING: paid ads, content production, sales team base + commission, marketing tools, agency fees. Most founders underestimate CAC by 30-50% because they exclude sales team time and overhead. Calculate quarterly. Compare to LTV: LTV/CAC above 3 is healthy. Track CAC by channel - blended CAC hides the channels that are bleeding.
In your business
- →Include EVERYTHING: ads, content, sales rep comp, marketing tools, agency fees
- →Compare to LTV - target LTV/CAC of 3+
- →Different channels have wildly different CAC; budget toward the efficient ones