It shows the money spent on marketing, salaries, and other things to acquire a customer.
CAC, combined with LTV is a frequently compared metric, particularly for SaaS companies.
They can manage their expenses, see their growth, predict their future moves, and expand if the business allows.
The simple method divides the total marketing costs to acquire new customers by the total number of customers acquired in a defined period.
In the approach and review phase of venture capital companies to start-ups, the CAC and LTV ratios can be of great importance depending on what type of market or product is produced.