Finance · business glossary
What is CAC (Customer Acquisition Cost)?
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
definition
The total cost — marketing, sales, and related effort — of winning one new paying customer.
CAC (customer acquisition cost) explained
CAC is what it costs, on average, to win one new paying customer — including advertising, sales effort, discounts and tools.
formula
CAC = Total sales and marketing spend ÷ New customers acquired
example
₹2 lakh spent on ads and sales in a month that brings 400 new customers gives a CAC of ₹500.
why it matters
If CAC is higher than the profit a customer brings over time, growth destroys money.
common mistake
Counting only ad spend and ignoring salaries, agency fees and discounts.
Frequently asked questions
What is CAC (customer acquisition cost)?
The total cost — marketing, sales, and related effort — of winning one new paying customer. CAC is what it costs, on average, to win one new paying customer — including advertising, sales effort, discounts and tools.
How do you calculate CAC (customer acquisition cost)?
CAC = Total sales and marketing spend ÷ New customers acquired. ₹2 lakh spent on ads and sales in a month that brings 400 new customers gives a CAC of ₹500.
Why does CAC (customer acquisition cost) matter?
If CAC is higher than the profit a customer brings over time, growth destroys money.
What is a common mistake with CAC (customer acquisition cost)?
Counting only ad spend and ignoring salaries, agency fees and discounts.
Related terms
LTV (customer lifetime value)
The total profit a business can expect to earn from one customer over the entire span of their relationship, not just their first purchase.
Conversion rate
The percentage of people who take a desired action (buying, signing up) out of everyone who saw the opportunity to.
Unit economics
The revenue and cost of a business at the level of one single unit — one customer, one order, one product — used to judge if the model actually works before scaling it.