Customer Acquisition Cost (CAC)
Definition
CAC is the average sales and marketing cost to acquire one customer, calculated as total acquisition spend divided by new customers in the period.
How it comes up in fundraising
Investors pair CAC with LTV: an LTV-to-CAC ratio of 3 or higher, with CAC paid back within 12 to 18 months, is the standard SaaS health check.
Frequently asked questions
What counts toward CAC?
All sales and marketing costs: salaries, ads, tools, and commissions. Excluding sales salaries is the classic way founders flatter the number, and investors re-add them.
What is CAC payback?
The months of gross margin from a customer needed to recover their acquisition cost; under 12 months is strong for SaaS.
Round Funded resources
Related terms
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