◈ GLOSSARY · BUSINESS & ENTREPRENEURSHIP
CAC (Customer Acquisition Cost).
A definition, in plain English — with the books that teach it.
Reviewed by ClearValue Editorial Team · Jun 27, 2026
◈ DEFINITION
What it means
Definition
CAC is the fully-loaded cost to acquire one paying customer: total sales and marketing spend in a period divided by new customers acquired in that period. Compare it to LTV — the rule of thumb is LTV should be at least 3x CAC, with payback under 12 months. Cheating by excluding salaries or counting organic customers makes CAC look better than it is.
◈ IN PRACTICE
Example
A company spends $200,000 in a quarter on sales and marketing and signs 500 new customers. CAC = $200,000 / 500 = $400. If LTV is $1,333, LTV:CAC = 3.3x.