What is CAC?
Customer Acquisition Cost (CAC) is the total cost of winning a customer to purchase a product or service. As a business grows, it needs to ensure that the cost of acquiring a customer is significantly lower than the value they bring.
Formula:
CAC = (Total Marketing Cost + Total Sales Cost) / New Customers Acquired
For example, if you spend $6000 on ads and sales efforts to get 200 customers, your CAC is $30 per customer. You must earn more than $30 in profit from each customer to be sustainable.