"Customer acquisition cost (CAC) isn't just a marketing metric - it's a key measure of your profitability potential. It affects your margins, your potential growth speed, how much risk you have and how resilient your business is in different conditions. Whether you're running paid ads, relying on referrals or posting on Instagram when you remember, CAC is always there, shaping the sales and marketing math behind the scenes."
"Most founders track ad spend but don't truly understand their customer acquisition cost, but CAC is one of the biggest drivers of profitability, cash flow and how risky or resilient their business really is. If your CAC is too high relative to your margins and lifetime value, scaling doesn't fix the problem - it quietly makes it worse. CAC tells you whether your business model actually works sustainably and shows you whether the path you're on will pay off or not."
"At its simplest, CAC is how much it costs you to acquire a new client. The basic formula looks like this: Total sales and marketing spend ÷ number of new clients acquired That includes ad spend, software, agencies, contractors, sales commissions and even your own time if you're doing sales yourself. If you spent $5,000 on marketing and sales last month and signed 10 new clients, your CAC is $500."
Customer acquisition cost (CAC) measures how much it costs to acquire a new client, calculated by dividing total sales and marketing spend by the number of new clients acquired. CAC includes ad spend, software, agencies, contractors, sales commissions and founders' time when applicable. CAC drives profitability, cash flow, growth speed, risk and resilience, and it persists whether businesses use paid ads, referrals or organic social. High CAC relative to margins and lifetime value cannot be fixed by scaling and worsens financial health. Accurate CAC measurement reveals whether a business model is sustainable and guides decisions on pricing, channels and investment.
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