marketing & sales

do you know your cac number? 

how to unravel the real costs to land a new client. 

by sandi leyva

do you know how much it costs your business to acquire a new client?  in marketing, one of the key metrics is cac, client acquisition cost. so how do you compute it?

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the first thing is to properly segregate your marketing costs into separate accounts or classifications. often, marketing is hidden among a lot of other accounts:

  • membership dues for networking groups are often in dues and subscriptions
  • meals and entertainment for marketing should be included in marketing costs
  • conference and travel fees should be captured if there are marketing opportunities beyond education
  • internal labor spent in sales meetings, on social media, writing articles, giving speeches, and performing other marketing activities should be included in marketing costs
  • marketing apps that might be included in a technology or admin expense account should be included in marketing costs
  • postage and printing should be included if it’s attributable to marketing flyers or other documents

once you have all of your marketing costs accounted for, the formula is easy. how many clients did you acquire last year?  take your total marketing costs and divide by the number of new clients for the same time period, and you have your cac. do this over time to see if costs are rising or declining.

your cac will vary depending on how many clients come through referrals. if your firm relies heavily on referrals and doesn’t market aggressively through other channels, your cac will be very low.  if your business is less than three years old, has gone through a recent transition, is aggressively marketing or is in a high-growth stage, your cac will be higher.

one response to “do you know your cac number? ”

  1. frank stitely

    this is also a really interesting number to have when you’re thinking about acquiring a firm. are you really better off spending the money you would have spent to buy a firm on acquiring the type of new clients that you want organically? it may be less expensive to grow organically once you look at the return on investment from buying a firm versus new client acquisition.