ARR vs CAC
ARR (Annual Recurring Revenue (advanced)) and CAC (Customer Acquisition Cost) both come up in business conversations and get confused. Here's the plain-English difference, side by side, so you can use each one with confidence.
The key difference: ARR refers to annual recurring revenue (advanced), while CAC refers to customer acquisition cost — they describe different things even when they show up in the same sentence.
ARR — Annual Recurring Revenue (advanced)
The annualized value of all active subscription contracts. The single most important metric for SaaS valuation.
CAC — Customer Acquisition Cost
The total cost of acquiring a new customer, including marketing and sales expenses.
When to use ARR
Reach for "ARR" when the conversation is specifically about annual recurring revenue (advanced). The annualized value of all active subscription contracts. The single most important metric for SaaS valuation.
When to use CAC
Reach for "CAC" when the conversation is specifically about customer acquisition cost. The total cost of acquiring a new customer, including marketing and sales expenses.
FAQs
What is the difference between ARR and CAC?
ARR stands for Annual Recurring Revenue (advanced) — The annualized value of all active subscription contracts. The single most important metric for SaaS valuation. CAC stands for Customer Acquisition Cost — The total cost of acquiring a new customer, including marketing and sales expenses.
Are ARR and CAC the same thing?
No. They're often used in the same conversation because they're related, but they describe different concepts. ARR = Annual Recurring Revenue (advanced). CAC = Customer Acquisition Cost.
When should I use ARR vs CAC?
Use ARR when you're specifically referring to annual recurring revenue (advanced). Use CAC when the topic is customer acquisition cost.