Glossary
CAC
Meaning and details
CAC is total sales and marketing spend over a period divided by the customers it produced: ads, content time at a real hourly rate, tooling, affiliate commissions, launch discounts, all of it. A month with $2,000 of spen...
CAC meaning
Customer acquisition cost: the fully loaded cost of winning one paying customer, the floor your unit economics must clear.
What is CAC?
CAC is total sales and marketing spend over a period divided by the customers it produced: ads, content time at a real hourly rate, tooling, affiliate commissions, launch discounts, all of it. A month with $2,000 of spend and 40 new paying customers carries a $50 CAC. The number only means something next to LTV, and the ratio LTV to CAC above 3 is the conventional green zone, with payback period, months of gross profit to recover CAC, as the cash-flow conscience beside it.
Why it matters to an indie builder: CAC is the difference between a business and a hobby that costs money. When you know it per channel, spending becomes engineering: kill the $180-CAC channel, feed the $40 one, and the same total budget yields four times the customers. Without it, budget decisions default to intuition, and intuition systematically overweights the channels that feel productive, like the social feed you enjoy posting to.
A concrete example: a $12-monthly tool spreads $1,500 across two channels. Ads: 18 customers for $1,200, CAC $67, and they churn in 5 months, LTV $60, a loss per customer. Content: 12 customers for $300 of writing time, CAC $25, tenure 16 months, LTV $192, nearly eightfold return. The naive read, ads win on volume, inverts under CAC-LTV math, and the correct move, cut ads, double writing, compounds: content ranks and its CAC falls every month while ad CAC only rises with competition.
Common mistakes: counting only the ad spend and not your hours (founder time at zero distorts every channel comparison toward the ones you personally touch), blending all channels into one CAC, which averages a profitable engine and a bonfire into one meaningless figure, computing CAC from signups instead of paying customers, free users are a cost, not an acquisition, and celebrating a good ratio with a two-year payback, cash dies before the ratio pays out; indie-runway math favors payback under 12 months. See ltv and mrr for the companions; the analytics blocks on IndieBoot attribute spend to cohorts natively.
How is CAC calculated?
CAC = Total Cost of Acquisition / Number of Customers Acquired