Founder Glossary · Business Modeling
The price of a new relationship.
What it is
Customer acquisition cost is the average amount you spend to win one new customer.
CAC = total sales and marketing spend ÷ new customers acquired (over the same period)
What to include
Ad spend, sales salaries and commissions, marketing tools, events, content production, and the share of your own time spent selling. If it was spent to win customers, it belongs in CAC.
An example
A studio spends $1,200 in a month on ads, flyers, and a showcase night, and signs eight new clients. Its CAC is $1,200 ÷ 8 = $150 per client. (Illustrative figures.)
Why it matters
CAC tells you what growth costs. On its own it says little. Set beside lifetime value, it tells you whether growth pays.
Payback period
Payback period = CAC ÷ monthly gross profit per customer. If each client brings in $75 a month in gross profit, the $150 spent to win them is earned back in two months.
Common mistakes
- Leaving out salaries and your own selling time, which makes CAC look cheaper than it is.
- Blending every channel into one number. Measure CAC channel by channel.
- Counting returning customers as new ones.
Related terms: LTV · Unit Economics · Revenue Stream
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