Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) measures the average expense a business incurs to acquire a new customer. It accounts for marketing, advertising, sales expenses, and related overheads.

Formula:

CAC = (Total Sales & Marketing Expenses) / Number of New Customers Acquired

Importance:

  • Determines marketing and sales efficiency.

  • Guides pricing and customer lifetime value (CLTV) analysis.

  • Influences fundraising narratives for growth-stage businesses.

Example:

A Dubai-based e-learning startup spends AED 200,000 on marketing in Q1 and acquires 500 new subscribers. The CAC is AED 400 per subscriber.