Customer acquisition cost (CAC) is the total sales and marketing spend required to acquire one new customer. Calculate it by dividing your total sales and marketing spend in a period by the number of new customers acquired in that same period.
Formula: CAC = (Sales + Marketing Spend) / New Customers Acquired
If you spend $100,000 on sales and marketing in a month and land 10 customers, your CAC is $10,000.
CAC tells you whether your go-to-market model is sustainable. If your CAC is $15,000 but your customer lifetime value (LTV) is $20,000, you're making money. If CAC is $15,000 and LTV is $10,000, you're losing money on each customer, no matter how many you sell.
CAC also reveals which channels work. If inbound marketing generates customers at $5,000 CAC and outbound at $20,000 CAC, you know where to double down. CAC is your early warning system for a broken GTM.
Calculating CAC Tally every cost: salesperson salary, tools (Salesforce, email, ads), marketing team salary, advertising spend, marketing software, events, content. Divide by customers acquired in the same period. Don't mix quarters; they'll confuse you.
Payback Period How long does it take for a customer to generate enough revenue to pay back the CAC? If CAC is $10,000 and a customer generates $1,000 in profit per month, payback is 10 months. In fast-moving SaaS, you want payback under six months. In enterprise sales, 9-12 months is normal.
Channel CAC Don't just calculate blended CAC. Break it by channel. What does it cost to acquire someone from Google Ads? From inbound? From outreach? You'll find your best channel and your worst, and you'll want to shift budget accordingly.
CAC Trends Track CAC month-over-month. If it's rising, your sales team is calling more people to land the same number of deals, or your market is getting more competitive. Both are problems.
The gold standard: LTV / CAC should be at least 3:1. If you spend $10,000 acquiring a customer and that customer generates $30,000 in lifetime value, you're healthy. Lower ratios mean thin margins. Higher ratios mean you're being too conservative.
We audit CAC by channel, identify high-intent activities that lower costs, tighten qualification, and test spend allocation shifts to optimize payback period.
Q: What's a good CAC? A: Enterprise SaaS: $10k-$50k. Mid-market: $3k-$10k. SMB: under $1k. Compare to your LTV and payback goals.
Q: Should we cut to lower CAC? A: No. Cutting spend lowers CAC but also revenue. Optimize for both growing customer count and lower unit costs.
Q: How do we assign costs to long deals? A: Use the close period. A June close gets May-June costs, not the month they started.