TL;DR: Customer acquisition cost (CAC) is the total cost of winning a new customer, calculated by dividing sales and marketing spend over a period by the number of new customers acquired in that period. It is a core measure of how efficiently a company grows.
CAC measures what a company spends, on average, to acquire one new customer. The basic calculation divides total sales and marketing costs over a period by the number of new customers gained in the same period. A fuller version includes the salaries, tools, and overhead that support sales and marketing, not only advertising spend.
CAC on its own says little. Its meaning comes from comparing it to the value a customer generates over their lifetime and to how quickly that cost is recovered.
The LTV:CAC ratio compares the lifetime value of a customer to the cost of acquiring them. The CAC payback period measures how many months of revenue, or gross profit, it takes to earn back the acquisition cost. Together they describe whether growth spending compounds into durable revenue or simply consumes cash.
A venture debt provider funding growth wants to see that capital put into acquisition reliably returns more than it costs. Efficient, stable CAC alongside strong retention is evidence that a facility deployed into go-to-market will strengthen the business rather than mask a leak.
What counts as a good CAC? There is no universal number. CAC is judged relative to lifetime value and payback period, and it varies widely by model, price point, and market.
Should CAC include salaries? A complete CAC includes the fully loaded cost of sales and marketing, including people and tools, not only advertising spend.
Related terms: LTV:CAC Ratio · Unit Economics · Churn Rate · Go-To-Market Strategy
