CAC (customer acquisition cost)

Take everything you spent on getting customers over a period: ad spend, the salary share of whoever did the selling, tools, commissions. Divide it by the number of customers who actually started paying in that period. That is CAC.

The common mistake is counting only the ad spend. If a founder spends four hours a day selling, that time is part of the cost, and leaving it out produces a CAC that collapses the moment they hire someone to do it instead.

Investors ask about CAC early because it tells them whether growth can be bought or only grown by hand. A business that cannot state its CAC usually has not yet separated selling from founding.

There is no universal good number. A ₦2,000 CAC is excellent for a consumer app and irrelevant for enterprise software where one contract is worth millions. What matters is CAC compared to what a customer is worth over their lifetime.

• LTV (lifetime value) — The total gross profit one customer produces before they leave.
• LTV to CAC ratio — How many naira of lifetime value each naira of acquisition buys.
• CAC payback period — How many months a customer takes to repay what you spent winning them.