Customer Acquisition Cost is calculated by dividing total sales and marketing expenditure in a period by the number of new customers acquired in that period. A company that spends $100K on sales and marketing in a quarter and acquires 50 new customers has a blended CAC of $2,000. The blended CAC includes all channels and all team costs — if the sales team is funded by investors but not allocated to the CAC calculation, the metric is misleading.
CAC should be segmented by channel and customer segment. A company's blended CAC may be $3,000, but its organic/inbound CAC might be $800 while its paid acquisition CAC is $6,000. Understanding this breakdown is essential for capital allocation: scaling a channel with a $6K CAC against an LTV of $10K is marginally viable; scaling the channel with an $800 CAC is a compounding flywheel.
CAC payback period — how many months it takes to recover the CAC through gross profit — is often more intuitive than the LTV:CAC ratio. A 12-month CAC payback is strong for enterprise SaaS; 18–24 months is acceptable; beyond 24 months requires a compelling explanation. Investors at Series A and beyond will probe CAC payback deeply, particularly in markets where customer acquisition costs are rising and capital efficiency is prioritised over growth velocity.