Let’s talk about CAC. CAC simply tells you how much it costs your business to acquire one new customer. The basic formula is: CAC = Total Acquisition Cost ÷ Number of New Customers Acquired I’d explain. If you spend $500 on advertising and get 50 new customers. $500 ÷ 50 = $10 CAC That means you spent an average of $10 to acquire each customer. But here’s where CAC becomes more useful. A CAC of $10 isn’t automatically good or bad. You need to compare it with what that customer is worth to the business. If a customer brings you $100 in revenue, spending $10 to acquire them may be workable. But if that customer only brings you $8, spending $10 to acquire them creates a problem. This is why marketers shouldn’t ignore CAC. For founders, CAC helps answer an important business question which is, “How expensive is it for us to grow?” Even if you have a great product and strong sales, but acquiring every new customer keeps getting more expensive, then scaling the business would become harder. For marketers, CAC helps you evaluate your acquisition strategy. If you’re spending more on ads but getting fewer customers, your CAC is rising. That could mean one of these: >> your targeting needs work >> your offer isn’t compelling enough >> your landing page is losing people >> or your acquisition channel simply isn’t performing well And there’s another important thing to note, Revenue does not tell you how efficiently you acquired the customer. CAC helps you see the cost behind that revenue. So when you look at your marketing results, ensure you calculate how much it cost to get new customers or users like we say on here. That question can change a whole lot. PS: CAC means Customer Acquisition Cost. I hope you get it. I’m open to questions in the CS. Catch you on the next one 🥂