Customer Acquisition Cost
The total cost of acquiring a new paying customer, including all sales and marketing expenses divided by new customers acquired.
FAQs
What is CAC payback period and what benchmark should I target?
CAC payback is the number of months to recover acquisition cost from gross profit. Under 12 months is excellent for SMB SaaS. 12–18 months is acceptable. 18–24 months is typical for mid-market SaaS. Over 24 months is common in enterprise but requires longer-term funding. VCs generally prefer under 18 months.
How do you reduce CAC without cutting growth?
Invest in organic channels (SEO, content, community, word-of-mouth) that have near-zero marginal cost. Improve conversion rates at each funnel stage. Implement product-led growth (free trials, freemium) to let the product sell itself. Shorten sales cycles through better qualification. Improve onboarding to reduce time-to-value.
Should I include customer success costs in CAC?
The prevailing convention is to exclude customer success costs from CAC (since CS retains existing customers, not acquires new ones) and include them in the cost of revenue or 'cost to serve' used to calculate LTV. However, for upsell-driven growth, some CS costs may legitimately be included in expansion CAC.
Related Terms
Customer Lifetime Value
The total net revenue a business expects to earn from a customer over the entire duration of their relationship.
Annual Recurring Revenue
The annualized value of all active recurring subscription contracts, the primary revenue metric for SaaS businesses.
Magic Number
A SaaS sales efficiency metric measuring how much new ARR is generated for every dollar spent on sales and marketing.
Churn Rate
The percentage of customers or revenue lost within a given period due to cancellations or non-renewals.