Customer acquisition cost (CAC)

Customer acquisition cost, or CAC, estimates the sales and marketing cost required to add a new customer. A basic calculation divides acquisition spending during a period by the number of customers acquired. A more complete calculation includes salaries, commissions, advertising, tooling, agency fees, and other costs associated with the acquisition team.

CAC becomes meaningful only when the numerator, denominator, and time lag match. Enterprise sales expense incurred this quarter may produce contracts next quarter, while a consumer campaign may convert within days. Blended CAC combines channels and can conceal that one channel is efficient and another is not. Pitch decks often pair CAC with gross-margin-adjusted lifetime value, payback period, retention, and cohort size. Founders should distinguish observed CAC from a forecast based on an untested channel. Investors are usually less interested in one unusually efficient early cohort than in evidence that the company understands how acquisition cost changes as it reaches customers beyond its immediate network.