Definition

Customer Acquisition Cost (CAC) is a metric that calculates the total amount of money a business spends to acquire a new customer, including all marketing and sales expenses divided by the number of new customers gained during a specific period.

What is Customer Acquisition Cost (CAC)?

Customer Acquisition Cost emerged as a critical business metric in the early 2000s alongside the rise of digital marketing and SaaS business models. As companies shifted from traditional sales approaches to more trackable digital channels, accurately measuring the cost of acquiring customers became essential for assessing marketing efficiency and business sustainability.

The concept gained particular prominence in subscription-based businesses where upfront acquisition costs must be recouped through ongoing customer relationships. Today, CAC analysis has evolved to include sophisticated attribution models that track multi-touch customer journeys across channels. Modern sales intelligence platforms like Saber help organizations calculate more accurate CAC metrics by connecting marketing activities to eventual sales outcomes and providing visibility into the full acquisition funnel.

How Customer Acquisition Cost (CAC) Works

Calculating and analyzing CAC involves tracking all acquisition-related expenses and comparing them against the number and value of new customers gained during the same timeframe.

• Cost Identification: Accumulating all sales and marketing expenses including advertising spend, content creation, events, sales team salaries, commissions, tools, and technology costs for a specific time period.

• Customer Counting: Determining the exact number of new customers acquired during the measured time period, being careful to count only true new business rather than expansions or renewals.

• Basic Calculation: Dividing the total acquisition costs by the number of new customers to arrive at the cost per customer acquisition (Total Sales & Marketing Costs ÷ Number of New Customers = CAC).

• Segmentation Analysis: Breaking down CAC by customer segments, marketing channels, products, or regions to identify which acquisition strategies are most cost-effective.

• Payback Period: Calculating how long it takes to recover the CAC through customer payments, typically measured in months (CAC ÷ Monthly Average Revenue Per User = Months to Recover CAC).

Example of Customer Acquisition Cost (CAC)

A B2B software company spends $250,000 on marketing and $350,000 on sales over a quarter, acquiring 120 new customers during this period. Their CAC would be $5,000 per customer ($600,000 ÷ 120). Further analysis shows significant differences by channel: customers acquired through content marketing cost $3,200 each, while those from paid advertising cost $6,800. With an average monthly revenue per customer of $1,000, it takes 5 months to recover their overall CAC. The company implements targeted improvements to their highest-CAC channels, reducing their blended CAC to $4,200 by the following quarter while maintaining the same customer acquisition volume.

Why Customer Acquisition Cost (CAC) Matters in B2B Sales

CAC is a foundational metric in B2B sales because it directly impacts profitability and informs resource allocation across marketing and sales functions. With limited budgets, understanding which acquisition channels and strategies deliver the best return helps organizations optimize their go-to-market approach. CAC must be evaluated alongside customer lifetime value (LTV)—typically aiming for an LTV:CAC ratio of at least 3:1 for healthy business economics. Rising CAC can signal market saturation, ineffective targeting, or competitive pressure, while declining CAC often indicates improving efficiencies or product-market fit. For companies raising capital, investors scrutinize CAC metrics as key indicators of business model viability and scalability.