CAC (Customer Acquisition Cost)
The total sales and marketing spend required to acquire one new paying customer, averaged across a period.
CAC measures how much it costs to acquire a single new paying customer. Computed as: total sales + marketing spend in a period, divided by net new paying customers added in that period.
The standard ratios
CAC alone isn't meaningful — it has to be paired with LTV. The usual benchmarks for healthy SaaS:
- LTV / CAC ratio: aim for 3× or higher. Below 1× means you lose money on every customer; 1–3× is marginal; above 3× is healthy.
- CAC payback period: months until cumulative gross profit from one customer covers their acquisition cost. Under 12 months is great; under 18 months is acceptable; over 24 months means the business is structurally cash-hungry.
Common gotchas
- Fully-loaded vs paid-only CAC — including salaries of the sales team is "fully loaded"; excluding them is "paid CAC". They give very different numbers; use fully loaded unless you have a reason not to.
- Free vs paid acquisition — organic acquisition has near-zero CAC and is often misattributed to paid channels. Track separately.
- Blended vs channel-specific — your average CAC might be $300, but Facebook ads might be $800 and content marketing might be $50. The blended number hides which channel is broken.
When CAC is rising
Almost universally a warning sign. Channels saturate; competition for the same ad inventory increases. A rising CAC trend with flat LTV means the business is becoming less profitable per customer over time — and the trend usually continues.
The corrective: invest in non-paid acquisition (content, community, product-led growth), increase LTV (higher pricing, better retention), or accept that growth will slow as you become more selective about which channels to fund.