Customer Acquisition Cost (CAC)
The total cost to acquire one new customer.
Definition
CAC is calculated by dividing total sales and marketing spend by the number of new customers acquired in a period. It includes ad spend, sales salaries, tools, content production — everything that goes into getting someone to buy. CAC must be compared against customer lifetime value (LTV) to determine if your business model works.
Why it matters for founders
If CAC is higher than the revenue a customer generates, you lose money on every sale. The LTV:CAC ratio is one of the most important metrics for SaaS businesses. Investors want to see LTV:CAC of 3:1 or better.
Example
You spend $10,000 on Google Ads and sales team costs. You acquire 50 customers. CAC = $200. If each customer pays $50/month and stays for 12 months (LTV = $600), your LTV:CAC ratio is 3:1.
How Foundra helps
Foundra's Validate phase helps you test customer acquisition channels before you spend real money. The Outreach Script + Plan card gives you a low-cost way to acquire early customers.
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Related terms
Lifetime Value (LTV)
The total revenue a customer generates over their entire relationship with your business.
Unit Economics
The revenue and costs associated with a single unit of your business (usually one customer).
Monthly Recurring Revenue (MRR)
The predictable revenue your business generates every month from subscriptions.
Churn Rate
The percentage of customers who stop using your product in a given period.