WHAT IS CAC? UNDERSTANDING CUSTOMER ACQUISITION COST AS A KEY METRIC
I’ll start with a confession:
The first time I was asked about CAC, in a room full of VCs, I had no idea what it meant.
Most early-stage founders don’t know their CAC from their KPI. It’s one of the most important indicators of sustained growth. Especially when you’re raising capital, scaling fast, or trying to understand why you’re haemorrhaging cash.
So, what is CAC?
It stands for Customer Acquisition Cost. It’s how much it costs you to get one paying customer.
That includes ad spend, agency fees, software, PR retainers, consultants, and any time or money you put into getting someone to buy. If it helped bring a customer in, it counts.
The formula is:
CAC = total cost of acquisition ÷ number of new customers
Why Is CAC Suddenly So Important?
Because growth isn’t enough anymore.
A few years ago, brands could raise millions based on a strong aesthetic and some early traction. Now, investors want proof that your business can grow in a sustainable way. CAC is one of the first numbers they’ll ask for.
In 2021 the focus was on user growth. In 2025 it’s about efficient growth. If your CAC is too high, it means you’re spending more to get customers than you can afford. That’s a problem.
What I Wish I Knew Back Then
CAC on its own doesn’t tell you much. You need to understand your LTV too. That’s lifetime value. A general rule is your LTV should be at least three times your CAC. If it’s not, you’re buying customers at a loss. And that doesn’t get better with scale.
Even early-stage brands should track this. You don’t need perfect data. You just need a rough idea. That’s better than sitting in a pitch meeting guessing.
Your CAC shows you how your business is working. Is it getting better over time? Are some channels cheaper than others? It’s not just a number. It’s a tool.
If you’re running an e-com brand, your ads team or media buyer should be able to tell you your CAC right away. If they can’t, that’s a red flag.
Want to Start Tracking CAC Like a Pro?
Here’s how to begin (without needing a CFO):
Add up every cost involved in getting new customers.
Break it down by channel: Instagram, Meta ads, Google, PR, affiliates, etc.
Divide that by how many paying customers you have.
Do this monthly. Watch the trends. Learn what works (and what doesn’t).
Final Thoughts
If you don’t know your CAC yet, that’s okay. But consider this your wake up call.
You’re building a brand. You’re wearing all the hats. But the founder who knows their numbers? That’s the one who walks into investor meetings with clarity and confidence.