CAC (Customer Acquisition Cost) is the average cost of acquiring one customer. The formula is simple: divide all marketing and sales costs in a period by the number of new customers gained in that period.
CAC = (marketing + sales costs) ÷ number of new customers. For example, spending $1,000 a month to gain 5 customers gives a CAC of $200.
CAC means nothing on its own
A high CAC isn't bad by itself. If a $200 CAC brings a customer worth $5,000 over their lifetime, that's excellent. That's why CAC is always read together with LTV (customer lifetime value). A healthy ratio is usually LTV:CAC ≥ 3:1.
The most reliable way to lower CAC isn't cheaper ads — it's improving conversion and lead quality. Low-quality leads raise CAC invisibly.