CACCustomer Acquisition Cost
CAC is the total cost of acquiring one new paying customer, including ads, salaries and tooling. It's broader than CPA.
CAC = Total Acquisition Cost / Number of New CustomersWhat does CAC actually mean?
Customer Acquisition Cost (CAC) is a finance-grade metric that includes all costs of acquisition (ad spend, salaries of the marketing team, ad-tooling subscriptions, agency fees and creative production) divided by new paying customers acquired.
CAC is broader than CPA. CPA captures only the ad-spend portion, while CAC captures the fully-loaded cost. A startup with a 5-person marketing team plus $50K/mo ad spend will have a CAC much higher than its CPA.
LTV/CAC ratio is the canonical SaaS health metric: 3:1 is considered healthy, 5:1 is excellent, below 1:1 means you're losing money on each customer. DTC brands often work to a payback-period threshold instead. Payback in 6 months is healthy for repeat-purchase brands.
Example
A SaaS company spent $30K on marketing (ads + team + tools) in a quarter and acquired 100 new customers. CAC = $30K / 100 = $300.
When it matters
Reported to investors, used to model unit economics, and the basis of LTV/CAC ratio. CPA is for campaign optimization; CAC is for business modeling.
Related terms
LTV
LTV is the total revenue or profit a single customer generates over their entire relationship with the business.
CPA
CPA is the cost to drive one conversion event: a purchase, signup, lead or install. It's the universal performance metric.
ROAS
ROAS measures revenue generated for every dollar of ad spend. A 4× ROAS means $4 in revenue for each $1 spent.
AOV
AOV is the average revenue per order. Increasing AOV is one of three core levers for ecommerce growth (alongside traffic and conversion rate).
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