Customer Acquisition Cost (CAC) is a metric that measures the cost a startup incurs to acquire a new customer.

What does CAC include?
CAC includes all the marketing and sales expenses associated with acquiring a new customer, such as advertising, sales team salaries, and other related costs.

How to calculate Customer Acquisition Cost

($) Total Sales & Marketing Expenses / (#) New Customers Acquired = ($) CAC

How can startups use CAC?
Startups can use CAC to evaluate the expenses and advantages of obtaining new customers, using the data to make informed choices regarding how to distribute resources to increase customer acquisition.

Is a high CAC bad?
That depends. “High” is relative to the industry, LTV, and customer type.

However, in general, a high CAC suggests that a startup is spending too much on customer acquisition, which can negatively affect profitability and sustainability. Conversely, a low CAC suggests that a startup is efficiently acquiring customers.