Customer Acquisition Cost

Also called CAC

What it costs you, all in, to win one new paying customer: the sales and marketing spend over a period divided by the customers it brought in. It is the price of growth.

CAC = total sales and marketing spend / new customers acquired in that period

Why it matters

If you do not know your CAC you cannot tell whether growth is making you money or quietly burning it. Read next to what a customer is worth over time, it decides whether a channel is worth scaling.

For example

A startup spends 10 lakh on sales and marketing in a quarter and wins 200 customers, so its CAC is 5,000 rupees per customer.

Go deeper

Startup Killer: The Cost of Customer Acquisition For Entrepreneurs · guide The definitive piece on why CAC versus LTV makes or breaks a business, with the ratios and the visual math that made these metrics standard. Open forentrepreneurs.com →

Customer Acquisition as an Investment Thesis Hustle Fund · article Reframes spending on acquisition as an investment with a return, a sharper way to think about CAC than treating it as a cost. Open hustlefund.vc →

Related terms

Also in Starting Up

See how founders actually handle this on Money, pricing and metrics, part of the Starting Up hub.

eChai Partner Brands