Customer Acquisition Cost (CAC)

CAC = total sales and marketing spend in a period ÷ number of new customers acquired in that period. 'Fully loaded' CAC includes everything that goes into acquisition: ad spend, sales-team salaries and commissions, marketing headcount, tools, content, and events — not just media dollars. A frequent mistake is counting only ad spend, which understates the real cost dramatically for sales-led businesses. The period and the customer definition must match: if salaries this quarter produce customers next quarter, naive division distorts the number, so growing companies often look at CAC by cohort.

Blended CAC divides total S&M spend by all new customers, including those who arrived organically (word of mouth, SEO, referrals). Paid CAC divides paid acquisition spend by only the customers that spend produced. Blended CAC always looks better because free customers dilute it — which is exactly why investors scrutinize the split. A company whose blended CAC looks healthy only because organic is carrying it has a problem the moment it tries to scale with paid channels. The marginal/paid CAC tells you what it actually costs to grow faster, which is the number that matters for planning a fundraise-fueled scale-up.

CAC says nothing about timing on its own — a high CAC is fine if customers pay it back quickly. CAC payback period = CAC ÷ (monthly gross-margin revenue per customer), expressed in months. It measures how long until a customer's gross profit repays the cost to acquire them. For SaaS, under ~12 months is strong, 12-18 is acceptable, and over ~24 months strains cash because you fund acquisition long before you recoup it. Payback is often more actionable than LTV/CAC for a young company because it directly drives burn and runway — fast payback lets you recycle cash into more acquisition.