Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) is the average price you pay to turn a person into a paying customer. You add up what you spend on ads, sales, marketing, and tools in a set time period. Then you divide that total by the number of new customers you got. The result shows what each new customer really costs you.

CAC matters because it tells you if your growth is healthy. If you pay more to get a customer than they spend with you, your model is in trouble. When CAC is lower than the revenue you earn over a customer lifetime, you have room to grow. Teams use CAC to compare channels, set budgets, and decide where to invest.

For a simple starting point, track CAC by channel each month. Add up the costs for email, paid ads, and referrals separately, then divide by the new customers from each source. You might find that email delivers lower CAC than other channels once it is set up. When you see that, you can shift more spend toward the channels that bring in good customers at a fair cost.