Customer acquisition cost

Customer acquisition cost (CAC) is the average cost of acquiring a new customer, calculated as total sales and marketing expenditure divided by the number of new customers acquired in the relevant period. CAC is paired with customer lifetime value (LTV) to assess unit economics, with the LTV-to-CAC ratio being the primary measure of marketing efficiency in subscription businesses.

In Australian SaaS M&A, an LTV-to-CAC ratio above 3:1 is generally considered healthy. A CAC payback period of 12 to 24 months is typical; longer than 36 months typically signals unit economics weakness.