Customer Acquisition Cost is calculated by dividing total sales and marketing spend by the number of new customers acquired in the same period. A sustainable SaaS business typically aims for a CAC payback period of 12-18 months and a lifetime value to CAC ratio (LTV:CAC) of at least 3:1. CAC includes salaries for sales and marketing teams, advertising spend, content creation costs, tools and software used for acquisition, and any other costs directly related to bringing in new customers. Tracking CAC by channel helps optimize marketing spend and improve return on investment.
Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) - CAC represents the average total cost a company spends to acquire one new customer, combining all sales and marketing expenses.
What is Customer Acquisition Cost (CAC)?
Examples
- 1
If a company spends $100K on sales and marketing in a quarter and acquires 50 new customers, the CAC is $2,000.
- 2
A SaaS company with $50 ARPU and $600 CAC has a 12-month payback period.
- 3
Reducing CAC from $1,500 to $1,000 while maintaining the same conversion rate improves margins by 33%.
Frequently Asked Questions about Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is the total cost of acquiring a new customer, including all sales and marketing expenses.
Customer Acquisition Cost is calculated by dividing total sales and marketing spend by the number of new customers acquired in the same period. A sustainable SaaS business typically aims for a CAC payback period of 12-18 months and a lifetime value to CAC ratio (LTV:CAC) of at least 3:1.
If a company spends $100K on sales and marketing in a quarter and acquires 50 new customers, the CAC is $2,000.
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