Metrics & Performance
CAC
Customer Acquisition Cost — the total cost to acquire one new customer, including sales and marketing expenses. A core unit economics metric that determines whether a business model is economically viable at scale.
Customer Acquisition Cost (CAC) is the total sales and marketing spend required to acquire one new customer. It is calculated by dividing total sales and marketing expenses over a period by the number of new customers acquired in that same period.
CAC = Total Sales & Marketing Spend / New Customers Acquired
CAC should be calculated on both a blended basis (all channels) and by channel (paid, organic, outbound, referral) to identify the most efficient acquisition paths. The payback period — how long it takes to recover CAC from gross profit — is the most actionable way to evaluate CAC in context.
In Practice
A SaaS company spends $200,000 on sales and marketing in Q1 (salespeople salaries, ad spend, events) and acquires 40 new customers. Blended CAC = $200,000 / 40 = $5,000. If average contract value is $1,200/year and gross margin is 70%, gross profit per customer per year = $840. CAC payback period = $5,000 / $840 = ~6 months. This is strong — sub-12-month payback is the target.
Why It Matters
CAC determines whether a business can grow profitably. High CAC relative to LTV means the company loses money on each customer at scale. Investors benchmark CAC payback periods: sub-12 months is excellent, 12-24 months is acceptable for enterprise, 24+ months is a red flag unless LTV is very high. Reducing CAC through product-led growth, organic content, and referrals is one of the highest-leverage activities for early-stage companies.
VC Beast Take
The most common CAC error is excluding fully-loaded costs. Founders often count only ad spend but not salesperson salaries, sales engineer time, or onboarding costs. Fully-loaded CAC is always higher than it first appears. The second mistake: looking at blended CAC without understanding which channels are efficient and which are burning money. Break CAC by channel — your best channel is probably 3-5x more efficient than your worst.