CAC is the total cost of acquiring one new paying customer — marketing spend, sales salaries, tools, and overhead — divided by the number of customers landed in the same period. It is the single most important cost metric in SaaS because it determines whether growth is profitable.
Keeping CAC low relative to LTV is the core unit-economics test. A CAC:LTV ratio of 1:3 or better is considered healthy; below 1:2 usually signals growth is too expensive to sustain. Tracking CAC separately by channel (paid search, outbound, content) reveals which acquisition paths are worth scaling.