What do investors use to determine the cost of acquiring new customers?

Investors commonly rely on Customer Acquisition Cost (CAC) to determine the cost of acquiring new customers. CAC is a critical metric that reflects the total expenses associated with gaining new customers, including marketing, sales efforts, and any related overhead costs, divided by the number of customers acquired in a given period. Understanding CAC can help investors assess the efficiency and effectiveness of a company's marketing strategies and overall business model in attracting new clients.

This metric is particularly valuable for evaluating profitability and sustainability, as a lower CAC relative to the revenue generated by those customers can signify a healthy business operation. By focusing on CAC, investors can make informed decisions about a company’s growth potential and competitive positioning in the market.