Customer Acquisition Cost (CAC)
What is CAC?
CAC is customer acquisition cost, the sales and marketing investment required to acquire customers.
CAC turns acquisition spending into a cost per new paying account. The arithmetic is simple, but the attribution is not: the customers who sign today may have been influenced by spending months earlier. Use a consistent scope and show the lag assumptions before comparing channels or periods.
Also known as: Customer Acquisition Cost
Formula
Overall CAC = S&M Spend / New Customers | Variable | Meaning |
|---|---|
S&M Spend | Sales and marketing spend. |
New Customers | Number of newly acquired customers. |
How to use it
- Define the new paying customer event and count distinct accounts, excluding renewals, free registrations, and reactivated customers.
- For Overall CAC, total sales and marketing acquisition spend, including sales and marketing salaries, commissions, advertising, agencies, and tools. Founder salary or time may be excluded; disclose whether you included it and document how shared costs are allocated.
- Divide total sales and marketing spend by all new paying accounts for Overall CAC. For Ad CAC, divide ad spend by new paying accounts acquired from those ads, not by all new accounts. Compare same-period and lagged views when the sales cycle spans several months.
Worked example
Hypothetical worked scenario
A fictional SaaS company spends $36,000 on acquisition staff, $9,000 on campaigns, and $5,000 on agencies and tools in a quarter. It wins 100 new paying accounts.
Acquisition cost pool = $36,000 + $9,000 + $5,000 = $50,000. Overall CAC = $50,000 ÷ 100 = $500.
Dividing only the $9,000 advertising bill by all 100 customers would produce $90, but that would mix a partial cost pool with customers from every channel. It would not represent fully loaded CAC.
Calculate with your numbers
Overall CAC = S&M Spend / New Customers | Variable | Meaning |
|---|---|
S&M Spend | Sales and marketing spend. |
New Customers | Number of newly acquired customers. |
Worked example
- S&M Spend
- $50,000
- New Customers
- 100
- → Overall CAC
- $500
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Open the CAC calculator for a focused view of the inputs.
What the result tells you
Track new customers and spend beside the ratio. A falling CAC caused by a temporary pause in hiring may reverse when growth resumes. Compare CAC with retention and gross profit for the same segment, then ask whether the company can finance the time needed to recover the acquisition spend.
Assumptions and common mistakes
- A channel CAC needs attributable customers and a stated allocation of shared costs.
- Do not count renewals or reactivated customers as new acquisitions. Separate expansion acquisition economics if you track them.
- If no new customers were acquired, show CAC as undefined and report the spend; a zero result suggests free acquisition.
Check how your team defines CAC against these rules.
Compare related measures
Frequently asked questions
Should CAC include salaries?
Overall CAC must include sales and marketing salaries attributable to acquisition. Founder salary or time may be omitted, but disclose whether you included it. An ad-spend-only calculation is Ad CAC when its denominator is new paying customers acquired from those ads; do not label it Overall CAC.
Why does CAC spike after hiring salespeople?
Costs can arrive before new representatives are productive. Track hiring dates and sales-cycle lag so you can distinguish a planned ramp from deteriorating conversion.
Sources and methodology
The references below explain the underlying methods. Our worked scenarios use hypothetical figures; they are not company results or current market benchmarks.
- Stripe: CAC in SaaS
Sales and marketing cost scope, new paying customers, and segmentation by acquisition channel.
- Bessemer: Scaling to $100 Million
Gross margin adjusted CAC payback and segment differences; historical research, not a current market benchmark.
Found an error or a definition that differs from your reporting? Send a correction with the page URL and the method you use.