Customer acquisition cost

Also called CAC, Cost per acquisition, CPA

What it costs, all in, to get one new customer.

What it means

Customer acquisition cost is total sales and marketing spend over a period divided by the number of new customers won in it.

"All in" means all of it: advertising, agency fees, tools, the salaries of the people doing sales and marketing, and the cost of the pitches you lost.

Why it matters

Compared against lifetime value, it tells you whether growth makes you richer or poorer. That is the single most important thing to know before spending more on marketing.

It also sets a ceiling on what a channel is worth. If a customer contributes £400 over their life, a £600 acquisition cost is not a channel to optimise, it is a channel to stop.

What it looks like in practice

Calculate it per channel as well as overall. Referrals typically have a very low CAC and paid advertising a high one, and the blended number tells you neither.

Include the sales time. In a business where the owner does the selling, leaving their time out makes every channel look profitable.

Track the payback period too: how many months of margin it takes to recover the cost. Under twelve months is comfortable for most businesses; much longer needs funding.

What to watch out for

Attribution. When someone sees an advert, asks a friend, then searches for you by name, deciding which channel "won" is a judgement, not a measurement — and every platform's own reporting claims the credit.

Excluding the cost of losing. If you pitch four times to win once, all four pitches are the cost of that one customer.

Where to get proper advice

Your own figures, honestly assembled. An accountant can help allocate costs consistently; no external tool can do this for you.