Founder Glossary
What Is CAC? How Much It Costs to Get a Customer
Customer acquisition cost (CAC) is the total cost of acquiring one new customer. It includes marketing spend, sales salaries, tool costs, and any other expense directly tied to getting someone to buy. CAC = total acquisition spending / number of new customers acquired in the same period.
Why customer acquisition cost (cac) matters
If it costs you $100 to acquire a customer who pays you $50, you're going bankrupt. CAC tells you whether your growth is sustainable. Combined with customer lifetime value (LTV), it's the most important equation in your startup: LTV must be significantly higher than CAC, or you're burning money to grow.
How it works
Add up everything you spend on acquiring customers in a given period - ads, content creation, sales team costs, tools, events. Divide by the number of new customers acquired. Compare to LTV. Healthy SaaS businesses have an LTV:CAC ratio of 3:1 or higher. Below 1:1 means you lose money on every customer.
Real example
Scenario
A SaaS startup spends $10,000/month on Google Ads and $5,000/month on a salesperson. They acquire 30 new customers per month.
What happened
CAC = $15,000 / 30 = $500 per customer. Their average customer pays $50/month and stays for 14 months (LTV = $700). LTV:CAC = 1.4:1 - not sustainable. They need to either lower CAC (better targeting, organic channels) or increase LTV (reduce churn, upsell).
Common mistakes
Not including all costs (salaries, tools, time) in the CAC calculation
Calculating CAC on a blended basis instead of by channel (some channels are 10x more efficient)
Comparing CAC to first-month revenue instead of lifetime value
Ignoring CAC payback period (how many months until you recoup acquisition cost)
Lowering CAC by targeting lower-quality customers who churn faster
Related concepts
More founder concepts
Stop reading about validation. Start doing it.
Describe your idea in plain English. AI extracts the assumptions. Real matched people test them. You get a clear report in days, not months.
Start free - no credit card