CAC: What is Customer Acquisition Cost, how to calculate it and reduce it

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Customer Acquisition Cost (CAC) is the set of investments made to convince a Lead to become a customer. In this post, we will explain how to calculate it through the Lifetime value

Customer acquisition cost (CAC) is the sum of investments made in marketing and sales divided by the number of customers gained in the same period. It is an essential metric for measuring the financial health of a company.


Referrals and networking. In my professional experience, these used to be the two main sources of clients for companies in any sector. A happy client referring another client and contact made at an event or course are excellent sources.

Do you think so too? So far, so good.

The problem starts when these are the only sources of new customers. Why? Because they cost too much!

As a business manager, have you already written down how much you kuwait whatsapp resource would be willing to pay for a new client? The problem with not knowing how much you are spending on a prospect is not knowing if that client is worth it. And that can be dangerous for your business. The result can be a company full of clients, an exhausted you, and accounts that are almost always static or negative.

Here are some concepts and tips that can help you in your search for new practices. Let's start with the Cost of Acquisition.

What is Customer Acquisition Cost?
Here at RD Station , we work a lot with the concept of Cost of Acquisition (CAC). It is an essential financial concept for the health of a company and fully applicable to the B2B and B2C business model.

Customer Acquisition Cost is the set of investments made to convince a prospect to become a customer.

How to calculate Customer Acquisition Cost?
By defining a specific period for analysis, such as a certain month or year, the CAC can be calculated in a simple way:

CAC = (everything invested in marketing + everything invested in sales ) / number of customers acquired

Marketing, sales, research, all these expenses are added up in this calculation. To give you a clearer idea, in an agency we could list the following expenses:

Hours of a manager in negotiation and initial meetings.
Travel times for meetings.
Gasoline and vehicle depreciation.
Hours of an analyst making diagnosis.
Telephone costs.
Hours of a salesperson at closing (or a manager in the role of a salesperson).
Structure cost.
Sponsored link campaigns.
Participation in associations, fairs and events for prospecting.
In short, everything that is done to attract a new business. But this measurement only makes sense if it is related to some others, and I am going to prioritize two: Lifetime Value and ROI – Return on Investment .