What is CAC?
Customer Acquisition Cost
Definition
Customer Acquisition Cost (CAC) is everything you spend to win one paying customer — ads, agency fees, sales time and tools — divided by customers acquired. If ₹3,00,000 of sales and marketing produced 60 customers, CAC is ₹5,000.
CAC matters only against LTV (customer lifetime value): a ₹5,000 CAC is excellent when a customer is worth ₹60,000 over their lifetime and fatal when they're worth ₹6,000. Healthy businesses typically target LTV of at least 3× CAC, and watch the payback period — how many months of revenue it takes to earn CAC back.
CAC naturally rises as you scale (cheap customers get bought first), so falling CAC at growing volume is the strongest sign your marketing engine is genuinely improving rather than just harvesting demand.
Example
A subscription business acquires customers at ₹1,000 CAC who pay ₹500/month and stay 14 months on average (LTV ₹7,000). LTV:CAC of 7 and a 2-month payback mean it can afford to scale spend aggressively.
Why it matters
CAC is the unit economics of growth. It answers the only question that matters at scale: does buying customers make money?
Everything spent to acquire: ad spend, agency/freelancer fees, sales salaries and commissions for the period, and marketing tools. Excluding these understates CAC and flatters the business.
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