Customer Acquisition Cost (CAC) in a subscription business is calculated by dividing the total cost of sales and marketing efforts to acquire new customers by the number of new customers acquired during a specific time period. The formula for CAC is:
CAC = (Total sales and marketing costs) ÷ (Number of new customers acquired)
This metric is important as it helps companies understand how much it costs to acquire a new customer and whether their sales and marketing efforts are paying off. It also helps companies determine if they are generating positive returns on their customer acquisition investments.