CAC (Customer Acquisition Cost)
The total cost of acquiring a new paying customer, including marketing and sales expenses.
What it means
Customer Acquisition Cost measures the average amount you spend to convert a prospect into a paying customer. It includes advertising spend, content creation costs, sales team salaries, tool subscriptions, and any other cost directly tied to bringing in new business. For bootstrapped SaaS founders, keeping CAC low is survival - and organic content marketing is one of the most effective ways to do it.
Formula
CAC = Total sales & marketing spend ÷ Number of new customers acquired
Why it matters
If your CAC is higher than your customer's lifetime value (LTV), you're losing money on every customer. The LTV:CAC ratio is one of the most watched metrics in SaaS - investors want to see at least 3:1. Understanding CAC also helps you decide which channels to double down on and which to cut.
What is CAC?
CAC stands for Customer Acquisition Cost. It's how much you spend on average to get one new paying customer, including all marketing and sales expenses.
What is a good LTV to CAC ratio?
A ratio of 3:1 or higher is considered healthy for SaaS. This means each customer's lifetime value is at least 3x what it costs to acquire them.
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