[GTM glossary](/glossary.txt) Customer acquisition cost

GTM Strategy & SaaS Metrics

# Customer acquisition cost (CAC)

In short

Customer acquisition cost (CAC) is the average total sales and marketing spend required to win one new customer. It is calculated by dividing acquisition costs in a period by the number of new customers in that period.

CAC shows how efficiently a go-to-market engine turns spend into customers. It is most useful when compared with what each customer is worth, as in the LTV to CAC ratio.

## How to calculate CAC

Include everything that supports acquisition: rep and marketer compensation, software, advertising, content, agency fees, and a share of overhead.

* **Formula:** CAC = total sales and marketing cost / new customers won.
* **Example:** Say a team spends $150,000 in a quarter on salaries, tools, ads, and events, and wins 25 customers. CAC is $6,000.

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## Blended vs. paid CAC

Blended CAC uses all spend and all new customers. Paid CAC uses only paid channel spend and the customers they produce. Blended is the full picture; paid is useful for judging individual channels. See blended CAC.

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## How to lower CAC

* **Tighten targeting:** Prioritize accounts that match your ideal customer profile and show buying signals.
* **Improve conversion:** Better qualification and follow-up turn more leads into customers from the same spend.
* **Shorten the sales cycle:** Less time per deal means less cost per deal.
* **Use referrals and partners:** Warm introductions often cost less than cold outreach.

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## Common mistakes

* **Leaving out costs:** Excluding salaries or tools makes CAC look better than it is.
* **Ignoring timing:** Spend today often closes deals next quarter. Align the periods to your sales cycle.
* **Chasing low CAC alone:** A cheap customer who churns quickly is expensive. Compare CAC to lifetime value and payback.
* **Mixing segments:** Enterprise and SMB CAC differ widely; report them separately.

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## Customer acquisition cost FAQs

**What is customer acquisition cost (CAC)?**

Customer acquisition cost is the average total sales and marketing spend required to win one new customer. It is calculated by dividing acquisition spending in a period by the number of customers gained in that period.

**How do you calculate customer acquisition cost?**

Add all sales and marketing costs for a period, including salaries, tools, ads, and agency fees, then divide by the number of new customers won in that period. Match the period to your sales cycle for a more accurate figure.

**What is included in customer acquisition cost?**

CAC includes sales and marketing salaries and commissions, advertising, software, events, content, agency fees, and often a share of overhead. Costs for serving existing customers, such as support, are usually excluded.

**How can you lower customer acquisition cost?**

Focus on accounts that fit your ideal customer profile, improve lead qualification and conversion, shorten the sales cycle, and use referrals and partners. Track CAC alongside retention so that savings do not come from lower-quality customers.

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## More related phrases

* [Cost per acquisition](/glossary/cost-per-acquisition.txt)
* [SaaS magic number](/glossary/saas-magic-number.txt)
* [Cost per lead](/glossary/cost-per-lead.txt)

## Similar phrases

* [CAC payback period (CAC)](/glossary/cac-payback-period.txt)  
CAC payback period is the number of months it takes for a customer's gross profit to repay the cost of acquiring them.
* [Blended CAC](/glossary/blended-cac.txt)  
Blended CAC is total sales and marketing spend divided by all new customers won, including those who arrived through organic, referral, or direct channels.
* [Customer lifetime value (LTV)](/glossary/customer-lifetime-value.txt)  
Customer lifetime value (LTV) estimates the total gross profit or revenue a customer will generate over the whole relationship, and guides how much to spend to acquire them.
* [Cost per opportunity](/glossary/cost-per-opportunity.txt)  
Cost per opportunity is the marketing and sales spend needed to create one qualified sales opportunity, a closer-to-revenue efficiency metric than cost per lead.
* [LTV to CAC ratio (LTV:CAC)](/glossary/ltv-to-cac-ratio.txt)  
The LTV to CAC ratio compares the lifetime value of a customer with the cost of acquiring them, showing whether your go-to-market spend pays back.