Definition: Metric calculating the total cost of acquiring a new customer, including marketing and sales, fundamental for evaluating growth sustainability.
— Source: NERVICO, Product Development Consultancy
What is CAC
CAC (Customer Acquisition Cost) is the metric that measures the total cost of acquiring a new customer. It is calculated by dividing total marketing and sales spending in a period by the number of new customers acquired in that same period. If a company spends 50,000 euros on marketing and sales in a month and acquires 100 new customers, the CAC is 500 euros. CAC includes sales and marketing team salaries, advertising spend, tools, events, and any other cost directly attributable to acquisition.
How it works
The basic calculation is: CAC = (Total sales spend + Total marketing spend) / Number of new customers. For more precise analysis, it can be segmented by channel (Google Ads CAC vs organic CAC vs direct sales CAC) and by time cohort. There is also the concept of CAC payback period, which measures how many months it takes for a customer to generate enough revenue to recover their acquisition cost. For healthy SaaS businesses, CAC payback should be under 12 months.
Why it matters
CAC determines whether a growth model is sustainable. The LTV:CAC ratio (lifetime value divided by acquisition cost) is one of the most important metrics for investors: a ratio of 3:1 or higher is considered healthy, meaning every euro invested in acquisition generates at least three euros of value over the customer’s lifetime. A CAC that grows faster than LTV indicates an unsustainable business model.
Practical example
A SaaS company spends 30,000 euros per month on digital marketing and 20,000 euros on a two-person sales team. In a typical month, it acquires 50 new customers. Its CAC is 1,000 euros. The average customer plan is 200 euros per month and the average customer lifetime is 18 months (LTV of 3,600 euros). The LTV:CAC ratio is 3.6:1, indicating a healthy model. If the team manages to reduce CAC to 800 euros by optimizing campaigns without affecting lead quality, the ratio improves to 4.5:1.