The average cost of acquiring one new paying customer, including all sales and marketing spend.
CAC = total sales & marketing spend in period ÷ new customers acquired in period
You spend £20,000 on sales and marketing in a quarter and win 50 customers.
£20,000 ÷ 50 = £400 CAC
CAC sums every pound spent on sales and marketing over a period — ad spend, salaries, commissions, tooling, and overhead — and divides it by the number of new customers won in that period. The fully-loaded version that includes salaries is the one that matters for real unit economics.
Be deliberate about the time window and about attribution lag. Spend in one month often produces customers in the next, so a same-period calculation can mislead for long sales cycles. Many teams use a trailing window or lag the customer count.
CAC on its own says little. It only becomes meaningful next to LTV (how much a customer is worth) and payback period (how long until they repay their acquisition cost).
CAC determines how expensive growth is. If it costs more to acquire a customer than they will ever be worth, you lose money on every sale. Keeping CAC in a healthy ratio to LTV is what makes growth sustainable rather than a cash incinerator.
CAC is judged against LTV and payback. Aim for an LTV:CAC ratio near 3:1 and CAC payback under 12 months for SMB SaaS.
Yes, for a true picture. Fully-loaded CAC includes sales and marketing salaries, commissions, tooling, and overhead — not just ad spend. The ad-only version flatters your economics.
CAC is the cost to acquire a customer. CAC payback period is how many months of gross-margin revenue it takes to earn that cost back.
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