Customer Acquisition Cost (CAC)
How much you spend to get one new customer through the door. Ads, promotions, influencer fees — divide your total marketing spend by new customers acquired. If your profit per customer is less than your CAC, you're paying to give products away.
Example
You blow $2,000 on Facebook ads and get 50 new customers. CAC = $40. Your average order nets you $25 in profit. You just lost $15 on every single new customer. Until they come back and buy again, that acquisition was a loss.
Why It Matters
If you don't know your CAC, you can't tell if your ads are growing your business or just growing Facebook's. Merchants who track CAC discover that some of their best-selling channels are actually money losers once acquisition cost is factored in.
Pro Tip
Calculate CAC for each ad channel separately. You'll almost certainly find one channel that's 3-4x more efficient than the others — double down there first.
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