CAC tells you what one new customer really costs once all marketing and sales spend is counted. Add customer lifetime value (LTV) to see the ratio that decides whether growth is sustainable.
Formula & methodology
CAC = total cost ÷ new customers over the same period. LTV:CAC = LTV ÷ CAC. The often-cited "3:1 healthy" figure is an industry heuristic (popularized in SaaS benchmarking), not a law — capital costs and payback periods matter as much.
Worked example
10,000 total spend → 125 new customers → CAC 80. With LTV 240 → ratio 3.0.
Limits
Blended CAC hides channel differences; count the full period cost including salaries and tools, or the number flatters you. Heuristics cited, nothing promised.