CAC: Customer Acquisition Cost
The total cost to acquire one new paying customer, including all marketing and sales expenses.
Formula
Why it matters
CAC is the most comprehensive acquisition cost metric because it includes all marketing and sales costs, not just ad spend. It is the key variable in determining whether a business is scaling profitably.
How to improve CAC
Improve organic channel contribution to reduce dependence on paid, increase trial-to-paid conversion rates to convert more of existing pipeline, and reduce sales cycle length.
Healthy CAC:LTV ratio is 1:3 or better — meaning LTV is at least 3× CAC.
Prooflytics tracks CAC automatically from your connected sources and flags it in your daily briefing when it moves significantly.
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Calculate CAC from total spend and new customers
CAC
CAC = Total Spend ÷ New Customers
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LTV:CAC ratio check
LTV:CAC ratio
LTV:CAC = LTV ÷ CAC
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Frequently asked questions
What is a good LTV:CAC ratio?
A ratio of 3:1 (LTV is 3× CAC) is considered healthy for SaaS. Below 1:1 means you are losing money on every customer. Above 5:1 may indicate you are underinvesting in growth. Most VCs use 3:1 as the benchmark.
What is the difference between CAC and CPA?
CPA (Cost Per Acquisition) typically refers to the cost per conversion event tracked in an ad platform — which could be a trial signup, not a paying customer. CAC includes all marketing and sales costs and counts only actual paying customers.