> ## Documentation Index
> Fetch the complete documentation index at: https://relate.so/docs/llms.txt
> Use this file to discover all available pages before exploring further.

# Customer Acquisition Cost (CAC)

> Customer acquisition cost (CAC) is the cost to acquire a new customer.

## Overview

Customer Aquisition Cost (CAC) refers to the cost of acquiring a new customer.

## What is Customer Acquisition Cost (CAC)?

Customer Aquisition Cost (CAC) is the sales and marketing cost to acquire a new customer.
Spending the right amount of money on customer acquisition is essential, as increasing CAC doesn't always lead to more customers.

### How to calculate CAC

To calculate your CAC, divide the total amount spent on sales and marketing to acquire new customers by the number of new customers.

<Card title="CAC Formula" icon="lightbulb" iconType="duotone">
  Customer Acquisition Cost (CAC) = \$ Spent on Acquiring New Customers / # of
  New Customers
</Card>

## Relate Content: LTV

<Tip>[What is Lifetime Value (LTV)?](https://relate.so/docs/wiki/ltv/)</Tip>

## Why CAC and LTV are important?

You can check the profitability of your product by considering the LTV:CAC ratio.
It is ideal when the LTV is greater than the CAC, which means that the revenue you generate from a customer is greater than the cost of acquiring the customer. Therefore, you can still profit with a higher LTV even with a high CAC. On the other hand, if you have a low LTV, you might have low profitability even with a low CAC.