Glossary

Customer Acquisition Cost

Customer Acquisition Cost (CAC) is the total expense incurred by a business to acquire a new paying customer. It is calculated by dividing the sum of all sales and marketing costs over a specific period by the number of new customers acquired during that same timeframe.

CAC serves as a primary metric for evaluating the efficiency of growth strategies and the long-term viability of a business model. For B2B and SaaS organizations, understanding the relationship between acquisition spend and customer lifetime value is essential for determining profitability. When CAC exceeds the revenue generated by a customer, the business model faces sustainability challenges. By monitoring this metric, organizations can identify which marketing channels, campaigns, or sales tactics provide the highest return on investment and allocate resources accordingly.

To calculate CAC accurately, practitioners must aggregate all relevant expenditures, including advertising spend, creative production costs, software subscriptions, and sales team salaries. It is critical to maintain consistency in what is included in the calculation to ensure period-over-period comparability. Practitioners should watch for fluctuations caused by seasonal trends or changes in lead quality. Effective management involves optimizing conversion rates throughout the funnel to lower the cost per acquisition without compromising the volume or quality of incoming leads.

Last updated: 2026-08-26