What Is Customer Acquisition Cost (CAC)?
The total cost to acquire one new customer, calculated by dividing all sales and marketing spend by the number of new customers acquired.
Customer Acquisition Cost (CAC) Explained
Customer acquisition cost measures how much you spend to win each new customer. The formula is straightforward: total sales and marketing costs divided by the number of new customers in the same period.
Include everything: ad spend, marketing salaries, sales salaries, software tools, agency fees, and content production costs. Many companies undercount CAC by only including ad spend, which makes their unit economics look better than reality.
CAC matters most when compared to Customer Lifetime Value (LTV). The standard benchmark is a 3:1 LTV to CAC ratio. If your average customer is worth $9,000 over their lifetime, you can afford to spend up to $3,000 to acquire them.
CAC varies dramatically by industry and channel. B2B SaaS companies average $200 to $800 for SMB customers and $5,000 to $50,000 for enterprise. Service businesses typically see $150 to $500 per new customer through digital channels.
Why Customer Acquisition Cost (CAC) Matters
If you do not know your CAC, you cannot know whether your growth is profitable. Many companies grow revenue while losing money on every customer because their CAC exceeds their margins. PE firms evaluate CAC as a core metric during due diligence.
How to Calculate Customer Acquisition Cost (CAC)
CAC = Total Sales & Marketing Costs / Number of New Customers AcquiredCommon Mistakes
- 1
Only counting ad spend and ignoring salaries, tools, and agency costs
- 2
Measuring CAC monthly when your sales cycle is 6 months, which skews the numbers
- 3
Not segmenting CAC by channel, which hides which channels are profitable
Related Terms
Customer Lifetime Value (LTV)
The total revenue a business expects from a single customer over the entire duration of their relationship.
Cost Per Acquisition Benchmarks by Industry
Average costs to acquire one customer across different industries, used to evaluate whether your marketing spend is competitive or wasteful.
Revenue Per Employee
Total annual revenue divided by the number of full-time employees, measuring operational efficiency and how effectively a company uses its workforce.
Net Revenue Retention (NRR)
The percentage of recurring revenue retained from existing customers over a period, including expansions and contracting, excluding new customers.
How Attainment Helps
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Frequently Asked Questions
What is a good customer acquisition cost?
A good CAC depends on your customer lifetime value. The benchmark is a 3:1 LTV to CAC ratio. If customers are worth $3,000, your CAC should be under $1,000. B2B companies typically have higher CAC but also higher LTV.
How do I reduce customer acquisition cost?
Improve conversion rates at each funnel stage, invest in organic channels (SEO, content, referrals), optimize ad targeting, and reduce sales cycle length. Often the fastest win is fixing your website conversion rate rather than spending more on ads.
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