In 60 Seconds
Metric Math
- •The Formula: Total Sales & Marketing Spend / Number of New Customers Acquired = CAC.
- •What to Include: Ad spend, Agency fees, Sales commissions, Software costs. Everything.
- •LTV (Lifetime Value): How much is a customer worth over 5 years? If CAC > LTV, you are dying. If LTV > 3x CAC, you are scaling.
- •Blended vs. Channel CAC: 'Blended' is your overall health. 'Channel' tells you if Facebook is beating Google.
- •The Goal: Don't lower CAC. *Optimize* CAC. Sometimes paying *more* for a better customer is the right move.
"I think my lead cost is $50." "Okay, but what is your Customer cost?" "..."
Most business owners know their CPL (Cost Per Lead). Very few know their CAC (Cost Per Acquisition).
The Formula
$ CAC = \frac{\text{Total Marketing + Sales Expenses}}{\text{New Customers Acquired}} $
Example:
- Google Ads Spend: $5,000
- Agency Fee: $1,000
- Sales Software: $500
- Sales Rep Commission: $2,000
- Total Cost: $8,500
- New Jobs Booked: 20
CAC: $8,500 / 20 = $425.
It costs you $425 to buy a customer.
The Context: LTV (Lifetime Value)
Is $425 good?
- If you fix a toilet for $200... No. You lost money.
- If you install a roof for $20,000... Yes. That is a money printing machine.
You must look at the LTV to CAC Ratio.
- 1:1 = You are losing money (after overhead).
- 3:1 = Healthy.
- 5:1 = High Growth (Spend more!).
Blended vs. Specific
- Blended CAC: Taking ALL spend and ALL customers. This is your "Business Credit Score."
- Channel CAC: "My Google Ads CAC is $300. My Facebook CAC is $600."
- Action: Move money from Facebook to Google.
[!TIP] Don't Forget Time If you start SEO today, your CAC will look terrible (High Cost, 0 Customers). You have to look at CAC over a trailing 3-6 month window to account for the sales cycle.
Read Next in This Hub:
- SEO vs PPC - Budgeting.
- AI Cost - Operational cost.
Related System:
- Local Visibility Systems - We report on this.