CAC – Customer Acquisition Cost

Customer Acquisition Cost (CAC) is the total cost incurred by a company to acquire a single new paying customer, including all marketing and sales expenses for a given period. It is the fundamental metric for measuring commercial efficiency: a CAC that is too high relative to the LTV makes growth unprofitable, while a low and decreasing CAC signals a maturing, efficient commercial model.

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Its formula is: CAC = Total sales & marketing expenses / Number of new customers acquired in the period. It is important to distinguish new logo CAC (cost to acquire a brand new client) from expansion CAC (cost to expand within an existing client) — the latter is typically 3 to 5 times lower and drives NRR improvement.

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The CAC payback period is the number of months needed to recoup the customer acquisition investment: CAC Payback = CAC / (ARPA × Gross margin %). A payback of 12–18 months is generally considered healthy for a B2B SaaS; beyond 24 months, the company may face cash flow tensions if it is growing fast.

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In financial due diligence of SaaS and subscription businesses, CAC is analysed by channel (inbound vs outbound, digital vs field sales), by customer segment and by vintage cohort. A structurally increasing CAC — despite growing marketing budgets — is a signal of diminishing returns that must be investigated before any acquisition or fundraising decision.

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Example: a Swiss B2B SaaS spends CHF 480,000 on sales and marketing in Q2 and acquires 40 new clients. CAC = 480,000 / 40 = CHF 12,000. ARPA = CHF 18,000/year, gross margin 70%. CAC payback = 12,000 / (18,000 × 70% / 12) = 11.4 months — excellent, validating the commercial model efficiency.

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At Hectelion, we analyse CAC, payback periods and LTV/CAC ratios in our valuations and due diligences of Franco-Swiss SaaS and recurring-revenue businesses.