All terms
Growth
CAC (Customer Acquisition Cost)
The total marketing and sales spend required to acquire one customer, including labour, tools, ads, and any other directly attributable costs.
In plain English
How much it costs to land one customer. Most founders under-count this by leaving out their own time and tooling.
Example
$5,000 spent on marketing + sales in a month, 25 new customers signed → CAC = $200.
Formula
CAC = Total acquisition spend / New customers acquired
Why it matters
CAC paired with LTV (lifetime value) tells you whether the business model works at scale. Without that ratio you're just hoping.
Common mistakes
- Excluding founder time from CAC (a $200/hour founder spending 50 hours/month on sales costs $10k/mo)
- Mixing organic and paid acquisition into one CAC (compute separately to know which channel works)