CAC (Customer Acquisition Cost)
CAC is the total cost of acquiring a single new customer, including marketing spend, sales costs, and overhead allocations. It's the demand-side counterpart to LTV.
What it is
Customer Acquisition Cost is what you actually spend, fully loaded, to bring in one new paying customer. For healthcare, that often translates to cost-per-admit. The 'fully loaded' part matters — CAC isn't just paid media spend; it includes salaries, agency fees, software, and overhead amortized over the new customers acquired in the period.
How to calculate
CAC = (Marketing spend + Sales costs + Agency fees) / Number of new customers in the period.
Example: $30,000 marketing + $20,000 admissions team payroll + $5,000 agency = $55,000 / 5 new admits = $11,000 CAC.
Why it matters
CAC paired with LTV tells you whether your business model is sustainable. A 3:1 LTV:CAC ratio is the rule of thumb for healthy growth. Below 1:1, you're losing money on every customer; above 5:1, you're probably under-investing in growth.
Frequently asked questions
Should I include organic / inbound in CAC?
Yes if it's meaningful spend (content team, SEO retainer, etc.). 'Free' channels aren't actually free.
Does CAC payback time matter?
Critically. Even with healthy LTV:CAC, a long payback (12+ months) strains cash flow. Aim for < 12-month payback for SaaS; healthcare practices vary by service line.
How is CAC different from cost-per-lead?
Cost-per-lead is the price of a form fill. CAC is the price of a paying customer. The ratio between them is your sales conversion rate.
