Customer acquisition cost (CAC) refers to the total cost incurred by a business in acquiring a new customer. This includes all the costs associated with marketing and sales efforts, such as advertising expenses, salaries of sales and marketing personnel, commissions, and other related costs.

To calculate CAC, businesses typically add up the total costs associated with acquiring new customers over a given period and divide it by the number of new customers acquired during the same period. This calculation helps businesses understand how much it costs to acquire new customers and can inform decisions on marketing and sales strategies.

It's important for businesses to keep their CAC low to improve profitability and ensure long-term success. If the cost of acquiring a customer is too high, it may be unsustainable for the business to continue to acquire new customers at that rate.