What is Customer Acquisition Cost (CAC)?
Customer acquisition cost (CAC) is the total cost of acquiring a new customer, including sales and marketing expenses divided by the number of customers acquired.
CAC measures the investment required to win each new customer. It includes sales salaries, commissions, marketing spend, tools, and overhead. Efficient sales organizations aim to recover CAC within 12-18 months through the customer's subscription revenue.
How to Calculate CAC
CAC = (Total Sales & Marketing Cost) ÷ (Number of New Customers Acquired). For example, if you spend $500K per quarter on sales and marketing and acquire 50 customers, your CAC is $10K. CROs track CAC by channel to identify the most efficient acquisition paths.
CAC Payback Period
CAC payback period measures how many months of revenue it takes to recoup the acquisition cost. A healthy SaaS company targets 12-18 month payback. If your ASP is $50K/year and your CAC is $40K, your payback is about 10 months — efficient. Above 24 months is a red flag.
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