The average amount spent to acquire one new customer.
Customer Acquisition Cost (CAC) quantifies the total fully-loaded sales and marketing expenditure required to secure a single paying customer over a given period.
How much money you have to spend on ads, sales commissions, software, and pitch decks just to get one customer to say yes and pay you.
Spending ₹5,00,000 on digital advertisements, sales team salaries, and events in a quarter, resulting in 50 new enterprise clients. Your acquisition cost per client is ₹10,000.
Quarterly spend: ad campaigns ₹3 lakh, sales commissions ₹2 lakh, SDR salaries ₹4 lakh, CRM software ₹1 lakh = ₹10 lakh total. New customers signed: 20. Blended CAC = ₹10 lakh ÷ 20 = ₹50,000.
Companies frequently understate CAC by excluding sales salaries, onboarding costs, or agency fees. If organic and paid channels are blended without separation, founders miss that paid channels may be deeply unprofitable.
CAC must be evaluated against Customer Lifetime Value (LTV). If CAC exceeds 33% of LTV (or payback takes longer than 12 months), the acquisition model requires immediate restructuring.