At a basic level, CAC is the cost to acquire a customer. This is usually found by dividing the amount spent on marketing by the number of customers acquired during that period. An important thing to note is calculating “blended” CAC vs “paid” CAC. Blended CAC is the (Total acquisition cost / Total new customers acquired across all channels). This isn’t wrong, but also includes organic acquisitions - paid CAC more accurately reflects how effective your paid channels are. Paid CAC is calculated by dividing (Total Acquisition Cost / New Customers Acquired through Paid Marketing). 

CAC is important to both companies and investors. Investor and companies use it to analyze the scalability of new companies. They can determine a company’s profitability by looking at the difference between how much money can be extracted from customers and the costs of acquiring them. In metric-terms, this is the ratio between CLV (customer lifetime value) and CAC. 

Did this answer your question?