Total expense a business spends to acquire a new customer. It is determined by dividing direct acquisition costs by the number of new customers and enables startups to identify the most effective channels in terms of return on investment (ROI).

Once achieving product-market fit, conventional wisdom suggests that your CLTV/CAC ratio should exceed 3:1, and your CAC payback period should be under 12 months.

Spending $500 on ads to gain 10 customers gives a CAC of $50.