Glossary
Customer Acquisition Cost (CAC)
Customer acquisition cost, or CAC, is the total cost of winning one new customer, including ads and the other sales and marketing costs involved.
Formula
CAC = total sales and marketing cost ÷ new customers
Example
If you spend $3,000 on ads and $1,000 on sales time in a month and win 20 customers, your CAC is $200.
How to read it
A healthy business usually wins customers for well under what they're worth over their lifetime.
Why it matters
CAC tells you what you can afford to spend to grow. Compare it with customer lifetime value: if a customer is worth far more than it costs to win them, you can grow faster.
Common mistakes
- Counting only ad spend and ignoring sales time and tools.
- Looking at CAC without lifetime value.
- Averaging across very different channels.
How to improve CAC
- Improve conversion rates at each step so fewer leads are wasted.
- Stop spending on channels that bring leads but no customers.
- Speed up follow-up so more leads close.
- Use referrals and win-back to add customers who cost little to acquire.
Related: Ad budget calculator
Related terms
Customer Lifetime Value (LTV)Customer lifetime value, or LTV, is the total revenue you can expect from one customer over the whole time they stay with you.Cost Per Acquisition (CPA)Cost per acquisition, or CPA, is how much you spend on ads to get one conversion, such as a booking or a sale.ROAS (Return on Ad Spend)ROAS, or return on ad spend, is the revenue your ads bring in for every dollar you spend on them.