Customer Acquisition Cost

Customer Acquisition Cost (CAC) is the total cost incurred to acquire a new customer. It is calculated by dividing total sales and marketing expenses by the number of new customers acquired in a period: CAC = (Sales + Marketing Costs) / New Customers. CAC includes advertising spend, sales team compensation, marketing tools, content creation, events, and any other costs attributable to customer acquisition. CAC is evaluated relative to Customer Lifetime Value (CLV)—a healthy SaaS business targets a CLV:CAC ratio of at least 3:1. CAC payback period (how many months until a customer's revenue covers their acquisition cost) is another critical metric, typically targeting 12-18 months for SaaS businesses.