Customer Acquisition Cost (CAC)
Total Marketing Spend ($)
New Customers Acquired
Customer Acquisition Cost (CAC) is the total marketing and sales spend required to acquire one new paying customer. Low CAC relative to Customer Lifetime Value (LTV) indicates a healthy business.
- 1CAC = Total marketing & sales spend / New customers acquired
- 2Track over a specific period (month, quarter, year)
- 3LTV:CAC ratio > 3:1 is generally considered healthy
- 4Payback period = CAC / Monthly gross margin per customer
Spend $50k in Q1, acquire 200 customers=CAC = $50,000 / 200 = $250 per customer
| LTV:CAC ratio | Interpretation |
|---|---|
| < 1:1 | Unsustainable — spending more to acquire than customer is worth |
| 1:1 to 3:1 | Marginal — needs improvement |
| 3:1 | Healthy — standard SaaS benchmark |
| > 5:1 | Excellent — or under-investing in growth |
References
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