- What is CAC and what costs should be included?
- Customer Acquisition Cost (CAC) = Total Sales and Marketing Spend / New Customers Acquired. Include all costs directly tied to acquiring customers: advertising, marketing salaries, sales team compensation, agency fees, tools, and any events or trade shows.
- What is the difference between blended CAC and paid CAC?
- Blended CAC uses total S&M spend divided by all new customers (including organic). Paid CAC uses only paid channel spend divided by customers acquired via paid channels. Investors often scrutinize paid CAC to assess scalability of paid acquisition.
- How often should I calculate CAC?
- Monthly CAC is useful for spotting trends, but it can be noisy due to sales cycle lag. Customers acquired in a given month may have been influenced by marketing spend from prior months. Quarterly CAC smooths out this lag and gives a more reliable signal.
- What is the relationship between CAC and LTV?
- CAC and LTV are the two sides of unit economics. The LTV:CAC ratio tells you how much value a customer generates relative to the cost to acquire them. A 3:1 ratio is the SaaS benchmark. Payback period (CAC / Monthly ARPU) tells you how quickly you recoup that acquisition cost.
