Why is Customer Acquisition Cost (CAC) important for business growth?

Customer Acquisition Cost (CAC) shows how much it costs to acquire each new customer. It helps businesses evaluate if their growth strategy is financially sustainable. Monitoring CAC allows companies to optimize marketing spend, improve ROI, and ensure long-term profitability.

What expenses should be included in the CAC calculation?

CAC includes all costs directly tied to acquiring new customers, such as ad spend, sales and marketing team salaries, commissions, agency fees, software tools, and content/event costs. Exclude expenses related to customer support, product development, or retention.

How can a company reduce its CAC?

Companies can reduce CAC by targeting higher-quality leads, improving conversion rates, and focusing on the most cost-effective marketing channels. Strategies include content marketing, automation, and better sales-marketing alignment to lower costs and shorten the sales cycle.

Customer Acquisition Cost (CAC): Definition, Formula & Benchmark

What is Customer Acquisition Cost (CAC)?

Customer Acquisition Cost (CAC) is the total cost a company incurs to acquire a new customer. It includes all sales, marketing, advertising, and associated overhead expenses over a given period, divided by the number of new customers acquired during that time.

It’s a core metric in assessing marketing efficiency, sales performance, and business sustainability, especially in SaaS and subscription-based models.

How to calculate Customer Acquisition Cost (CAC)?

CAC is calculated by dividing total customer acquisition expenses by the number of new customers acquired in the same time period.

Steps to calculate CAC

Step 1 –

Choose a consistent time frame (monthly, quarterly, annually).

Step 2 –

Add all relevant marketing and sales expenses, including:

Salaries of marketing/sales teams /Ad spend Software/tools for acquisition / Creative/agency fees Events, webinars, sponsorships

Step 3 –

Tally the number of net new paying customers gained in that period.

Step 4 –

Use the CAC formula to calculate.

Formula to calculate CAC

CAC = Number of New Customers Acquired ÷ Total Sales and Marketing Expenses

Benchmark for CAC

CAC benchmarks vary by industry and business model, but here are general ranges:

B2C (e.g., e-commerce): $10 – $200
B2B SaaS (SMB focus): $500 – $2,000
B2B SaaS (Enterprise focus): $5,000 – $25,000+

Related Metrics for CAC

Customer Lifetime Value (LTV)
LTV:CAC Ratio
Churn Rate

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FAQ's

CAC reveals how much it costs your business to acquire each new customer, helping you evaluate whether your growth strategy is financially sustainable. A high CAC relative to customer revenue can indicate poor marketing efficiency or a misaligned sales process. By monitoring CAC, companies can optimize spending, improve ROI, and ensure long-term profitability as they scale.

CAC includes all costs directly tied to acquiring new customers within a specific period. This typically covers advertising spend, sales and marketing team salaries, commissions, agency fees, marketing software subscriptions, and content or event costs. Exclude expenses related to customer support, product development, or retention; only acquisition-focused spending should count.

Reducing CAC involves acquiring customers more efficiently. This can be achieved by targeting higher-quality leads, improving conversion rates, and refining marketing channels to focus on those with the highest ROI. Content marketing, automation, and better sales-marketing alignment also help lower CAC by reducing manual costs and shortening the sales cycle.