Opinions expressed by Entrepreneur contributors are their own.
Key Takeaways Most founders track ad spend but don’t truly understand their customer acquisition cost, but CAC is one of the biggest drivers of profitability, cash flow and how risky or resilient their business really is.
If your CAC is too high relative to your margins and lifetime value, scaling doesn’t fix the problem — it quietly makes it worse.
CAC tells you whether your business model actually works sustainably and shows you whether the path you’re on will pay off or not.
Most founders can tell you how much they spend on ads each month. Fewer can tell you what it actually costs them to land a single paying client. And even fewer understand how important that number actually is. Just over half of marketers know their metrics, so don’t feel bad if you don’t. But it’s time to change that!
Customer acquisition cost (CAC) isn’t just a marketing metric — it’s a key measure of your profitability potential. It affects your margins, your potential growth speed, how much risk you have and how resilient your business is in different conditions. Whether you’re running paid ads, relying on referrals or posting on Instagram when you remember, CAC is always there, shaping the sales and marketing math behind the scenes.
Let’s break down what CAC actually is, why it matters way more than most founders realize and how to think about it in a way that doesn’t make your head spin.
What CAC actually is
At its simplest, CAC is how much it costs you to acquire a new client.
The basic formula looks like this:
... continue reading