One of the most important unit economics metrics in any business that spends to acquire customers. Tells you what it costs to add one more customer to your base.
CAC (Customer Acquisition Cost) - the average amount of money spent to acquire one new customer, calculated by dividing total sales and marketing spend over a period by the number of new customers won in that same period.
How to calculate it
CAC = Total sales & marketing spend ÷ New customers acquired (same period)
Use fully-loaded spend, not just paid advertising. Include salaries, tools, content, and any cost required to acquire customers.
Common uses
- Unit economics - compared to LTV to determine if growth pays back
- Channel evaluation - breaking CAC down by channel shows which work
- Marketing budget decisions - what to spend, where
Watch out
Paid-only CAC (just ad spend ÷ new customers) is a different number than fully-loaded CAC. Always be clear which one you're quoting.
For the full explanation, see What Is Customer Acquisition Cost (CAC)?