Customer Acquisition Cost
What is Customer Acquisition Cost?
Customer acquisition cost (CAC) is what it costs, on average, to win one new customer. The formula is CAC = total sales and marketing spend ÷ number of new customers acquired in the same period. Spend includes advertising, lead-generation fees, the portion of sales wages and commissions tied to winning work, and any tools used to do so. CAC is most useful next to the value a customer goes on to generate: comparing it to customer lifetime value shows whether acquiring a customer pays back and over what horizon. On its own it is a cost; against lifetime value it becomes a verdict on growth efficiency.
CAC turns marketing from a feeling into a number. Whatever you spend to be found — ads, directories, lead fees, the time your team spends quoting and chasing — divides across the customers that spending actually produced. The result is the price of growth: what each new name on the books costs to land.
The figure only means something in context. A high CAC is fine if those customers stay for years and spend steadily; a low CAC is a trap if they leave after one job. That is why CAC is read alongside the lifetime value a customer goes on to generate and the rate at which they leave — together they tell you whether you are buying customers for less than they are worth, and how long the payback takes.
Measure it by channel where you can. Blending every source into one number hides which lines are efficient and which quietly lose money, so the averaged figure can look acceptable while a single channel drags it. Lower CAC by improving close rate and retention, not only by cutting ad spend.