Glossary
What is customer acquisition cost (CAC)?
Customer acquisition cost (CAC) is the average cost of winning one new customer: total sales and marketing spend in a period divided by new customers gained. Compared with customer lifetime value, it shows whether growth is profitable. Channels like directories and SEO mostly cost time, which should be counted too.
Calculating it
- Blended CAC: all sales and marketing costs ÷ all new customers.
- Paid CAC: paid channel costs ÷ customers from paid channels.
- Channel CAC: cost of one channel ÷ customers from it.
Include ad spend, tools, paid listings, contractors and, honestly estimated, founder or team time.
CAC and LTV
The LTV:CAC ratio compares what a customer is worth with what they cost. A frequently cited benchmark for SaaS is about 3:1; payback period (months to recover CAC from gross margin) is another check.
Low-cost channels
Directory listings, launch platforms, SEO and communities have low cash CAC but real time cost. Automating repetitive work, such as submissions, lowers the time part.
Example
A founder spends $400 on paid listings and 20 hours on submissions in a month, winning 25 customers. Counting time at $50 an hour, CAC is (400 + 1,000) ÷ 25 = $56.
FAQ
What is a good CAC?
One that's well below customer lifetime value; ratio and payback period matter more than the number.
Should founder time count in CAC?
For honest decisions, yes.
How do I lower CAC?
Improve conversion, focus on the best channels and automate repetitive acquisition work.