What is Customer Acquisition Cost & What It Tells About Your Business

Customer Acquisition Cost tells you how much, on average, it costs your company to acquire new clients.

Customer Acquisition Cost tells you how much, on average, it costs your company to acquire new clients.

There are a lot of important business data you should track as a business person, but one of the most important is Customer Acquisition Cost (CAC). Basically, Customer Acquisition Cost tells you how much, on average, it costs your company to acquire new clients. Essentially, this number determines whether or not your business is actually making money.

How do you calculate Customer Acquisition Cost?
You add up all of the costs of bringing in a new customer and divide that number by the number of clients you acquired to get your average CAC. The total cost of bringing in a new customer may include:

  • All marketing costs associated with bringing in new clients
  • Total salaries of sales and marketing
  • Cost of training and boarding new clients
  • And any other miscellaneous costs connected with acquiring and implementing new clients.

Why is knowing your Customer Acquisition Cost important?
If, for instance, your average CAC is $10,000 and your average client pays you $2,000 per year, then it would take you five years before you would break even for bringing in that client. You would use this information to figure out a way to bringing in new clients more efficiently.

If you are a business, you can’t afford to ignore the cost of customer acquisition. The earlier you work on this, the better. It is important to ask yourself, “Can my business realistically expect to gain new clients for considerably less than the amount that it costs me now?” By asking yourself that, you will be able to strategize your costs better so you can acquire new clients more efficiently. At Mollaei Law, we can help you determine your Customer Acquisition Cost and explain how it can help your business thousands of dollars. If you are having problem starting your business, learn how to start your business here.

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