What is CAC (Customer Acquisition Cost)?
The total sales and marketing spend required to acquire one new paying customer during a given period.
Customer Acquisition Cost (CAC) is the total sales and marketing investment required to win one new paying customer during a given period. It is calculated by dividing all sales and marketing expenses by the number of new customers acquired in the same period. CAC is the denominator in the LTV:CAC ratio and directly determines whether your growth is economically sustainable.
Formula
CAC = Total Sales & Marketing Spend / New Customers AcquiredInclude all costs: salaries, commissions, ad spend, software, events, and agency fees. New customers are gross new logos, not net (do not subtract churned customers). Example: $50,000 spent in Q1, 100 new customers. CAC = $500.
Industry Benchmarks
- SaaS SMB blended CAC: $200 to $1,200 per customer
- SaaS Mid-Market CAC: $3,000 to $15,000
- SaaS Enterprise CAC: $15,000 to $100,000+
- B2C consumer apps: $30 to $150 CAC via paid channels
- CAC Payback Period under 12 months is the target for most SaaS businesses
When to Use CAC
- Setting channel-level budget allocation based on CAC efficiency
- Calculating the CAC Payback Period to understand cash flow requirements
- Comparing blended CAC against channel-specific CAC to find inefficiencies
- Justifying growth investments to finance and board stakeholders
- Excluding fully-loaded costs such as sales team salaries and benefits, which understates true CAC
- Calculating CAC on a monthly basis when sales cycles span multiple months, causing attribution errors
- Using net new customers (after churn) instead of gross new customers, which inflates CAC
- Calculate CAC separately by channel (SEO, paid, referral) to find which channels have the best LTV:CAC
- Apply a 1-3 month lag to match marketing spend with the customers it generated when sales cycles are long
- Track fully-loaded CAC including product onboarding costs, as these significantly affect payback calculations
Related Terms
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