What it is
CAC is how much you spend, on average, to win one new customer. It bundles all sales and marketing costs over a period, divided by the customers gained in that period.
Facts
- CAC = Total sales & marketing spend / New customers acquired (same period).
- Include ad spend, sales salaries, tools, and commissions, not just ad dollars.
- A common SaaS rule of thumb is an LTV:CAC ratio of 3:1 or higher, but targets vary by business model, margin, growth rate, and customer segment.
- A common SaaS rule of thumb for the CAC payback period (months to recover CAC from margin) is under 12 months, but targets vary by business model, margin, growth rate, and customer segment.
Who it's for
Any founder acquiring customers through paid or sales channels.
How it helps you
CAC tells you whether your growth is profitable: comparing it to customer lifetime value reveals if you can afford to scale spending.
Caveats
A common mistake is counting only ad spend and excluding salaries and tools, which understates true CAC. CAC also rises as you exhaust cheap channels.
Conclusion
CAC is the cost side of growth; keep it well below customer lifetime value and watch the payback period so scaling doesn't bleed cash.
