Customer Acquisition Cost Calculator

Customer acquisition cost (CAC) is what you spend in marketing and sales to win one new paying customer. Divide total monthly marketing and sales cost by the number of first-time customers that month. A shop that spends $7,500 a month and wins 30 new customers has a CAC of $250.

How do you calculate customer acquisition cost?

Add up everything you spent to win new customers in a month, then divide by the number of first-time customers who paid you that month. Use the same month for both numbers. If your sales cycle is long, as with roofing or remodeling, use a full quarter so jobs sold late in the period aren't missing.

CAC = (Marketing + Sales) ÷ New customers

1. 1

   Total your marketing spend.

   Pull last month's ad invoices, lead fees and agency bills. Spread one-off costs like truck wraps or a new website over their useful life.

2. 2

   Add your sales cost.

   If your CSR spends about half their time on new-customer calls, count half their wage and payroll taxes. Add commissions paid on new-customer jobs.

3. 3

   Count new customers.

   Filter your CRM or QuickBooks for customers whose first invoice was in that month. Repeat customers don't count.

4. 4

   Divide, then compare.

   Divide total cost by new customers. Then check it against the gross profit on the first job and over the customer's lifetime.

What is a good customer acquisition cost for a contractor?

A good CAC is one your customers pay back with room to spare. There's no single benchmark, because a $250 CAC is cheap for a roofer selling $14,000 replacements and ruinous for a lawn crew charging $50 a cut. Judge it two ways: how many jobs it takes to pay back, and how it compares to lifetime gross profit.

How to lower your customer acquisition cost

Most contractors try to lower CAC by cutting ad spend. The faster fix is converting more of the leads you already paid for. If the shop in the example wins 40 customers instead of 30 on the same $7,500, its CAC drops from $250 to $188, and the first job turns a profit of $44 instead of a loss.

1. Answer every call. A missed call from an ad is a lead you paid for and threw away. The missed call calculator shows what that costs.
2. Respond to web and marketplace leads in minutes. Shared leads go to whoever calls first. Model your own numbers with the speed to lead calculator.
3. Raise your booking rate. Track how many callers book and coach the calls that don't. See the booking rate calculator.
4. Follow up every open estimate. Unsold quotes already carry their acquisition cost. Winning a few more costs nothing extra.
5. Cut the worst channel, not all channels. Work out cost per booked job for each lead source with the cost per lead calculator, then move money to the best one.

CAC vs. cost per lead: what's the difference?

Cost per lead is what you pay for one inquiry: a call, a form or a marketplace lead. Customer acquisition cost is what you pay for one paying customer, including the leads that never booked and the sales time spent on them. If a lead costs $60 and you turn one in four leads into a customer, your marketing CAC is $240 before any sales cost. Your cost per lead can look fine while your CAC is out of control.

Common mistakes

• Leaving out sales labor. The owner's or CSR's time on the phone is part of what it costs to win work.
• Counting repeat customers. They inflate the customer count and make CAC look lower than it is.
• Mixing periods. Spend from March and customers from April gives you a meaningless number. Match the periods, or use a rolling quarter.
• Blending all channels. A single CAC hides the channel that's losing money. Track it by lead source.