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Customer acquisition costThe average cost to acquire one new customer.
CAC (customer acquisition cost) is total sales and marketing spend divided by the number of new customers won. Unlike CPA (per order), CAC is per customer — who may buy again — so it pairs with LTV to show whether acquisition is profitable over time.
In practice
CAC is where marketing spend meets reality, and the honest version is blended: everything you spent to acquire customers divided by the new customers you actually got. Platform-reported cost per acquisition will always look better, because each channel counts customers it can claim and ignores the ones it can't. Blended CAC can't flatter itself — there's one spend total and one new-customer count.
It rises as you scale, and that's normal rather than a failure. The cheapest customers are the ones already looking for you; growth means reaching people who weren't. The question isn't whether CAC is climbing but whether it's still comfortably under what a customer is worth — which is why it's almost never read without LTV beside it.
Formula
CAC = Sales & marketing spend ÷ New customers
Example: $10,000 spend for 400 new customers = $25 CAC.
What a good result depends on
Judge it against LTV — a healthy LTV:CAC is around 3:1.
Common mistakes
- Leaving out non-ad acquisition costs (tools, agency, creative).
- Comparing CAC to first-order revenue instead of LTV.
Questions people ask
- What's the difference between CAC and CPA?
- CPA counts orders; CAC counts new customers. If people buy more than once, CAC is higher and is the right number for growth decisions, since it reflects what winning a relationship costs rather than a transaction.
- Should CAC include salaries and agency fees?
- Fully-loaded CAC includes them and is the truer figure; media-only CAC is easier to compare across channels. Both are legitimate — just be clear which one you're quoting, especially to investors.
- Do returning customers belong in the calculation?
- No. Divide acquisition spend by new customers only. Including repeat buyers deflates CAC and hides whether acquisition is actually working.