CAC (Customer Acquisition Cost)

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 is where unit economics either work or don't. A company can post spectacular revenue growth while destroying value if each new customer costs more to acquire than they'll ever return in profit. Rising CAC over time is also one of the earliest warnings that a go-to-market motion is saturating — the company has exhausted its cheap channels and is buying progressively more expensive customers.

Blended CAC divides all sales and marketing spend by all new customers, including those who arrived through free channels like word of mouth. Paid CAC isolates paid channels. Blended CAC is the right headline number, but paid or marginal CAC tells you what the next customer actually costs when you scale spend.

CAC means little in dollars on its own — a figure that's ruinous for a low-priced consumer app can be fine for enterprise software with large contracts. Judge it against what the customer returns, and compute payback on gross profit rather than revenue: a low-margin business takes far longer to recover the same CAC.