CAC stands for Customer Acquisition Cost, which is a business metric that measures how much an organization spends to acquire new customers. It is calculated by dividing the total expenses to acquire customers (cost of sales and marketing) by the total number of customers acquired over a given time. CAC is an important metric to consider when determining the profitability of a company because it compares the amount of money spent on attracting customers against the number of customers gained.

Analyzing CAC in conjunction with Lifetime Value (an estimate of how much revenue an account will bring in over its lifetime by continuing to purchase or subscribe for a longer period of time) or Monthly Recurring Revenue (the measurement of revenue generation by month) is a common way to discover whether or not a company is operating efficiently. By understanding CAC, a company is able to determine the most cost-effective way to acquire customers.

A companys CAC is the total sales and marketing cost required to earn a new customer over a specific time period. It includes all program and marketing spend, salaries, commissions, bonuses, and overhead associated with attracting new leads and converting them into customers. Understanding its CAC provides a business with the ability to fully analyze the value per customer and improve its profit margins.

In summary, CAC is a key business metric that helps companies calculate the overall value of a customer to the organization and maintain the profitability of their acquisition teams.