Glossary
CAC (Customer Acquisition Cost)
CAC measures the total cost of acquiring a new customer, including marketing, sales and overhead.
Customer Acquisition Cost (CAC) is the total cost of acquiring a new customer. It measures how much your company spends to attract new customers and includes all expenses related to customer acquisition, such as marketing costs, software, salaries, overheads, and more.
Why is CAC important?
Understanding your CAC is essential for running a profitable business. It helps you evaluate profitability by comparing acquisition costs with LTV, optimize marketing spend, and make informed investment decisions.
How is CAC calculated?
CAC = Total Sales and Marketing Costs / Number of New Customers
A common rule of thumb is that your LTV should be at least 3x your CAC (LTV:CAC = 3:1) for a sustainable business.