CAC (Customer Acquisition Cost)
The total average cost, including sales and marketing spend, to acquire one new paying customer.
CAC measures how much a company spends, on average, to acquire a single new customer, dividing total sales and marketing expense over a period by the number of new customers won in that same period. It's a core input into unit economics and is almost always evaluated alongside LTV to judge whether a business's growth engine is fundamentally sound.
CAC varies enormously by business model and go-to-market motion — self-serve or product-led companies typically have very low CAC, while enterprise sales-led businesses with long sales cycles and dedicated account executives often have CAC in the tens of thousands of dollars per customer, which is fine as long as contract values and retention support it.
CAC = total sales and marketing spend / number of new customers acquired, over the same periodA company spends $300,000 on sales and marketing in a quarter and closes 60 new customers in that period. CAC = $300,000 / 60 = $5,000 per customer.
Always calculate CAC alongside LTV and payback period, and be honest about what counts as sales and marketing spend — excluding founder time, tools, or channel partner costs to make CAC look better is a common way early-stage companies fool themselves before Series A diligence catches it.
What's a healthy LTV to CAC ratio?
A commonly cited benchmark is 3:1 or higher — meaning a customer's lifetime value should be at least three times what it cost to acquire them — though the right ratio depends heavily on payback period and gross margin.
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Run the numbers yourself: dilution, SAFE conversion, and fund-returner calculators.