customer acquisition cost

Beginner 📣 Marketing / Advertising

Definition

The total cost of winning a new customer, including all marketing and sales expenses divided by the number of customers acquired. Also known as CAC, or 'the metric that determines whether your business model is brilliant or just elaborate money-burning.'

Example Usage

Our CAC is $200, but lifetime value is $2,000, which means we can actually afford to scale without venture capitalists panicking.

Origin

Business metrics terminology from the 1990s, popularized in SaaS businesses

Fun Fact

The rule of thumb is that LTV should be at least 3x CAC, but many venture-backed startups ignore this completely because 'growth at all costs' sounded like a good idea in 2019.

Source: Business metrics and SaaS financial modeling

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