Rodok
Abderrazzak AbouyaalaCAC stands for customer acquisition cost: the average amount you spend on sales and marketing to win one new paying customer. It is a simple ratio. Add up what you spent over a period to bring in customers, then divide by the number of new customers you won in that same period.
Why CAC matters
CAC tells you what growth costs. If each customer costs more to win than they will ever pay you, every new sale makes the business poorer. If it costs far less, you can safely spend more. A founder deciding whether to hire a second rep, buy a new data tool or run an event needs this number before the decision, not after.
The CAC formula
CAC = total sales and marketing cost in a period / new customers won in that period
"Total cost" usually includes salaries and commissions for the people who find and close customers, ad spend, software, data and any agencies or events. Leave out the cost of serving existing customers.
A worked example
These numbers are made up to show the arithmetic. In one quarter a small team spends:
| Cost | Amount |
|---|---|
| Two reps (salary and commission) | $54,000 |
| Marketing and events | $9,000 |
| Software and data | $3,000 |
| Total | $66,000 |
The team wins 11 new customers that quarter. CAC = $66,000 / 11 = $6,000 per customer. To run your own numbers, use the CAC calculator.
CAC vs CAC payback
CAC is a cost. CAC payback is a time: how many months of a customer's gross profit it takes to earn back what you spent to win them.
CAC payback in months = CAC / (monthly revenue per customer x gross margin)
If the customer in the example pays $500 a month and your gross margin is 80 percent, that is $400 of monthly gross profit. $6,000 / $400 = 15 months. Two businesses can have the same CAC and very different paybacks, so look at both.
Common mistakes
- Leaving out salaries. Counting only ad spend makes CAC look far lower than it is.
- Mixing periods. Deals closed this quarter were often paid for last quarter. For long sales cycles, compare spend with customers a few months later.
- One blended number. CAC from referrals and CAC from cold outreach are rarely the same. Split it by channel.
- Ignoring retention. A low CAC is only good if customers stay.
Related terms
CAC sits next to sales velocity, which measures how fast deals turn into revenue, and pipeline generation, which is where much of the cost goes.
Frequently asked questions
What does CAC stand for?
CAC stands for customer acquisition cost. You will also see it written as cost of customer acquisition. It is the same idea in both forms.
What is a good CAC?
There is no universal number. A good CAC is one your customers repay quickly through gross profit. Compare it with your own payback time and retention, not with another company's figure.
Is CAC the same as cost per lead?
No. Cost per lead is what you spend to get one lead. CAC is what you spend to get one paying customer, so it also reflects how many of those leads close.
