What Is CAC? Total Cost Divided by Customers Won
DICTIONARY · FUNDAMENTALS

What Is Customer Acquisition Cost?

Customer acquisition cost is the total cost of winning a customer: all marketing and sales spend divided by the number of customers acquired.

In plain English

The calculation is straightforward and almost always understated, because people include ad spend and leave out salaries, tools, agency fees and the sales time that closed the deal.

A CAC figure only means something next to two others: what a customer is worth over their lifetime, and how long it takes to recover the cost.

What to know

All costs in
Media, salaries, tools, agency fees, sales time.
Divided by customers
Not by leads, which is a different and easier number.
Compared to lifetime value
The ratio is what matters, not the absolute figure.
Payback period
How long until the customer has repaid the cost.

Why it matters

Businesses that grow themselves into trouble usually had an acceptable CAC to lifetime value ratio and a payback period longer than their cash allowed. Both numbers are needed.

Common mistakes

×Counting media spend only.
×Using cost per lead as a proxy.
×Ignoring payback period when growth is funded from cash flow.
×Blending channels, which hides the ones that do not work.

FAQs

What is a good CAC?

One recovered fast enough for your cash position, and well below lifetime value.

Should I calculate it per channel?

Yes. A blended figure hides which channels are actually working.

WRITTEN BY TARIQ SALLAM
Marketing Consultant. Entrepreneur. Content Creator.

I'm a marketing consultant, entrepreneur and content creator. I help businesses grow through practical marketing, websites, SEO, content and AI.

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