What is CAC?
Customer acquisition cost, or CAC, is what you spend to win one new customer. Add up sales and marketing cost over a period, then divide by the customers acquired in that period.
It is the cost side of the unit-economics equation. Whether it is too high depends entirely on what those customers are worth, which is why CAC is read against LTV and payback, never alone.
The CAC formula.
CAC = total sales and marketing spend divided by new customers acquired, in the same period. Blended CAC counts every new customer against all spend. Paid CAC counts only customers from paid channels against paid spend.
Include the real cost: ad spend, salaries, tools, and agency or contractor fees. Leaving out salaries is the most common way teams flatter their CAC.
A worked example.
You spend 50,000 dollars on sales and marketing in a quarter and close 25 new customers. CAC is 50,000 divided by 25, which is 2,000 dollars per customer.
What is a good CAC?
There is no universal good CAC. A 2,000 dollar CAC is excellent for a 20,000 dollar contract and fatal for a 300 dollar one. Judge it two ways. Against LTV, aim for an LTV to CAC ratio of 3 to 1 or higher. Against time, aim to recover CAC in under 12 months through gross profit.
Watch the gap between blended and paid CAC. If paid CAC sits far above blended, your organic and word-of-mouth channels are carrying the economics, and leaning harder on paid will raise your average cost to acquire.
How to improve your CAC.
Lower CAC by raising conversion or by shifting acquisition toward channels that do not charge per customer. Paid channels have a floor: every customer costs money, and that cost rises as you scale spend.
Organic search is the structural lever. Content that ranks keeps acquiring customers after it is published, at no incremental cost per customer, which pulls blended CAC down over time. That is the work we do. See how we lower blended CAC with organic search, or look at the Workwize numbers, where organic became the lowest-cost pipeline channel.