Unit Economics

CAC: Customer Acquisition Cost

The fully loaded cost of acquiring a single new customer.

Definition

Customer Acquisition Cost (CAC) is the total cost of acquiring a single new customer over a defined period. A blended CAC includes all sales and marketing spend (salaries, ads, tools, events, content). A paid CAC isolates only paid demand-generation spend.

Formula

CAC = Total Sales & Marketing Spend ÷ Number of New Customers Acquired

CAC = Total Sales & Marketing Spend / New Customers Acquired

Worked example

£100,000 spent on sales and marketing in a quarter, 20 new customers acquired, gives a CAC of £5,000 per customer. If each customer pays £500 per month, payback is 10 months at 100% gross margin.

Why it matters

CAC is the denominator of the most important ratio in commercial leadership: LTV:CAC. Every board will ask about it. CAC also tells you whether the business can fund growth from cash flow or must keep raising capital.

Common mistakes

  • Excluding fully-loaded sales salaries and benefits from the numerator
  • Counting expansion revenue customers as new customers in the denominator
  • Using contribution margin instead of revenue when computing payback against CAC

Related terms

LTVLTV:CACCAC PaybackMagic Number

Read more in The Guide

Chapter: Unit Economics →

Sources & further reading

  • — Drawn from Evara's working definitions used on retained search and revenue advisory engagements (2024–2026).
  • — Reconciled against industry conventions in SaaStr, OpenView SaaS Benchmarks and Bessemer State of the Cloud.
  • — Reviewed by Rich Evans, Strategic Advisor at Evara and former operator/founder.

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