What Is User Acquisition Cost (CAC)? Definition, Examples & Best Practices
User Acquisition Cost User acquisition cost (CAC), also called customer acquisition cost, is the total cost of acquiring a new paying customer. It is calculated as: total sales and marketing spend / number of new customers acquired in the same period. CAC includes advertising, sales salaries, marketing tools, content creation, and any other cost directly tied to acquiring customers.
Why user acquisition cost matters
CAC determines whether your growth model is sustainable. If it costs $500 to acquire a customer who generates $200 in lifetime value, the business is burning cash. The ratio of Customer Lifetime Value (LTV) to CAC should be at least 3:1 for a healthy SaaS business.
How it works
Calculate CAC monthly or quarterly. Include all costs: paid advertising, sales team compensation, marketing software, content production, events, and partnerships. Divide by the number of new paying customers acquired in the same period. Segment by channel to understand which acquisition channels are most efficient.
Common mistakes
Not including all costs (forgetting sales salaries, tool costs, or content production)
Not segmenting CAC by channel (some channels are 10x more efficient than others)
Ignoring the payback period (how long it takes to recoup CAC from a customer)
Comparing CAC without considering LTV (a high CAC is fine if LTV is higher)