Customer acquisition cost (CAC) is the total sales and marketing spend required to win one new customer, calculated by dividing that spend by the number of customers it acquired.
In depth
CAC is only meaningful next to lifetime value (LTV). The LTV:CAC ratio is the health check — a widely used rule of thumb is that LTV should be at least 3× CAC for a sustainable business, and that you should recover CAC within about 12 months.
Example
You spend $10,000 on marketing in a month and acquire 200 customers, so CAC = $50. If each customer is worth $200 over their lifetime, your LTV:CAC ratio is 4:1 — healthy. At $180 LTV it would be 3.6:1; at $100 it would be a struggle.
Related terms
Calculate CAC and LTV together with our free CAC & LTV calculator.