What is CAC (Customer Acquisition Cost)?
CAC (Customer Acquisition Cost) is the total cost to acquire one paying customer, including all sales and marketing expenses divided by the number of new customers in the period. In B2B SaaS, a CAC payback period of 12–18 months is healthy; above 24 months signals a unit economics problem.
Customer Acquisition Cost (CAC) is the total cost to acquire one new paying customer. You calculate it by dividing total sales and marketing spend in a period by the number of new customers acquired in that same period. A B2B SaaS company that spends $200,000 on sales and marketing in a quarter and acquires 20 new customers has a CAC of $10,000.
What costs should you include in CAC?
All sales and marketing costs attributable to acquiring new customers. This includes: sales rep salaries and commissions, marketing team salaries, ad spend, sales tools (CRM, sequencer, data), marketing tools (SEO, paid channels), and recruiting costs for sales hires. Exclude costs that serve existing customers (customer success, account management) and product development costs. The goal is a number that reflects the full cost of generating one new customer from scratch.
What is CAC payback period and why does it matter?
CAC payback period is the time it takes to recover the cost of acquiring a customer from the gross profit that customer generates. Formula: CAC ÷ (monthly ACV × gross margin). Example: CAC of $10,000, ACV of $12,000/year ($1,000/month), 70% gross margin. CAC payback = $10,000 ÷ ($1,000 × 0.70) = 14.3 months. In B2B SaaS, a payback period of 12–18 months is healthy. Above 24 months means you're carrying the acquisition cost for two years before breaking even on a customer — which creates cash flow risk, especially without strong retention.
How do you reduce CAC?
The two levers are spend efficiency (getting more customers from the same spend) and conversion rate (turning more pipeline into customers). Spend efficiency: tighten the ICP so marketing dollars reach fewer but more likely buyers. Conversion: improve discovery and demo quality so a higher percentage of prospects close. AI-assisted outbound reduces the cost-per-prospect significantly — the prospecting and sequencing work that previously required a human SDR at $80K+ per year runs at a fraction of that cost, directly reducing the denominator of the CAC calculation.
What is the relationship between CAC and LTV?
LTV:CAC ratio is the primary unit economics metric in B2B SaaS. A ratio of 3:1 or higher means you generate $3 of lifetime customer value for every $1 you spend acquiring them — the standard benchmark for a healthy business. Below 2:1, the business is either spending too much to acquire customers or retaining them too poorly to generate adequate lifetime value. Both the numerator and denominator matter: improving LTV (through better retention and expansion) and reducing CAC (through more efficient acquisition) both move the ratio.