Customer acquisition cost is the total amount of money spent on sales and marketing to acquire a single new customer. It is calculated by dividing total acquisition costs (marketing spend, sales team salaries, tools, advertising, events) by the number of new customers acquired in a given period. CAC is one of the most important metrics for any B2B company because it directly determines whether your growth model is sustainable.
A healthy CAC depends on your industry, deal size, and business model. The general benchmark for SaaS companies is that CAC should be recovered within 12 months and that the ratio of customer lifetime value to CAC should be at least 3:1. If it costs more to acquire a customer than that customer generates in revenue, the business model is unsustainable.
Reducing CAC is a constant objective for growth-oriented companies. More efficient prospecting, better lead qualification, and higher conversion rates all drive CAC down.
Key Points
- Calculated as total acquisition costs divided by number of new customers acquired
- Should be recovered within 12 months for sustainable SaaS growth
- The CLV-to-CAC ratio should be at least 3:1
How It Works
You sum all sales and marketing expenses for a defined period, including salaries, tools, advertising, content creation, and events. You then divide this total by the number of new customers acquired in the same period. The result is your average cost to acquire one customer.
Best Practices
- Track CAC by channel and campaign to identify the most efficient acquisition paths
- Monitor the CLV-to-CAC ratio to ensure your growth model remains sustainable