Customer Acquisition Cost (CAC) is the total amount of money a company spends to acquire a new customer. It includes all the costs tied to marketing and sales — like ad spend, salaries, software tools, and creative production — divided by the number of new customers gained during a specific period.
In short:
CAC = Total Sales & Marketing Costs ÷ Number of New Customers
Understanding your CAC is essential for figuring out if your growth strategy is actually profitable. It tells you how much you’re investing to grow, and whether that investment is sustainable.
Why CAC matters:
- It helps you measure marketing efficiency.
- It’s a key input for metrics like CAC Payback Period and LTV:CAC ratio.
- It guides budget decisions and pricing strategy.
Example:
If your company spent €50,000 on marketing and sales last quarter and brought in 100 new customers, your CAC is €500. If each customer brings in €300 in revenue, you’ve got a problem. But if each is worth €1,200, you’re in good shape.