In the SmartUp methodology, CAC measures the efficiency of acquiring new customers and is a critical component of the sales expenses section of the business model. CAC includes all costs directly related to acquiring a customer: advertising spend (like PPC campaigns), personnel costs for sales or support staff, and any operational effort spent on marketing or outreach.
High CAC can make a business unsustainable, especially if the revenue per customer is low. Stern emphasizes strategies to reduce CAC: building a strong brand (so customers come inbound), creating growth engines like free tools or valuable content, and refining the target market to focus on the highest-converting segments. Stern also highlights a pricing “dead zone” between $1,000-$5,000 where CAC challenges are acute – too high for e-commerce alone but too low to justify salesperson cost.
Operationally, CAC is treated as a variable expense that fluctuates with each new customer and must be monitored alongside Cost of Goods Sold to assess gross margin and business viability. It differs from stable, fixed expenses like rent or salaries for non-sales staff.
