CAC

What it means

CAC is marketing and sales spend for a period divided by the customers won in it. It covers not just clicks but salespeople’s wages, tools and commissions.

The number alone says nothing. It becomes meaningful against lifetime value: if a customer returns three times what winning them cost, the model works.

CAC is not the cost per enquiry, nor the cost per click. A click is a visit, an enquiry is expressed interest, a customer is a signed contract, and some people drop out at every step. The cost therefore multiplies along the way. Cheap clicks can still mean an expensive customer if only a handful of them ever reach an order.

How it works in practice

Calculate it per channel, or an expensive channel hides behind a cheap one. In accounting services a referred lead costs almost nothing, while paid advertising buys a client for tens or hundreds of euros.

CAC includes the time spent on proposals that never sign. If two thirds of quotes fail, the third that closes carries the cost of the rest.

When reviewing a client’s marketing we join data from three places: costs from the books, the customer’s source from the CRM and the date of the first invoice. Only then can CAC be broken down by channel and month. Advertising spend is assigned to the period in which it brought customers, not to the date of the ad platform’s invoice.

What to watch out for

Companies compare CAC with the first invoice instead of the margin over the whole relationship. On a monthly retainer acquisition pays back over months, so judging by the first payment kills a working channel.

If a customer returning after a year, or an existing client ordering one more service, is counted as new, CAC comes out lower than it really is. A decision to raise the budget then rests on a flattering number. The definition of a new customer should be agreed in writing and match the one used when calculating churn.