Customer Acquisition Cost, or CAC, refers to the marketing expenses involved in acquiring a client.These expenses include marketing salaries, advertisements, marketing software, consultants, and other related costs.Assessing these metrics is crucial to understanding the efficiency of your marketing and what the trends are.

Does it cost less to acquire a customer? Over time, your customer acquisition costs should decrease as you gain a deeper understanding of your customers and their challenges. This will allow you to acquire them more efficiently.Another reason your customer acquisition costs should decrease over time is that your products or services enhance, delivering greater value, which in turn attracts potential customers to your offerings more effectively.

𝗛𝗼𝘄 𝗱𝗼 𝘆𝗼𝘂 𝗰𝗮𝗹𝗰𝘂𝗹𝗮𝘁𝗲 𝘁𝗵𝗲 𝗖𝗔𝗖?

ou take all your sales and marketing costs for a period - whether it be a month or a quarter - and then divide it by the number of customers you acquired.Sales and marketing expenses should always reflect the previous period, while newly acquired customers should taken from the current period.

For example, divide the Q3 2024 sales and marketing costs by the clients acquired in Q4 2024. If you spent £15,000 on sales and marketing in Q3 2024 and acquired 3 customers in Q4 2024, then your CAC is £5,000.

You looked at the marketing costs for Q3 2024 and compared them with customers acquired in Q4 2024 because there is always a delay between when you spend the money and when you acquire the customer.Converting a lead into a customer involves several stages. For example, a company first learns about you and then requests a demo; the demo takes place, and they then proceed with the trial version. All these stages can take a month or two.

𝗛𝗼𝘄 𝘁𝗼 𝘀𝗽𝗹𝗶𝘁 𝘆𝗼𝘂𝗿 𝗦𝗮𝗹𝗲𝘀 & 𝗠𝗮𝗿𝗸𝗲𝘁𝗶𝗻𝗴 𝗰𝗼𝘀𝘁𝘀

In small companies, it is common for an employee to wear multiple hats, especially when the company has around £1m in annual revenue.An example is when a founder spends half of the time on marketing (this is very common) and then the other half on product development, half of the founder's salary must be allocated to sales & marketing.

When you review your profit and loss statement, here is how you should see your sales & marketing costs divided:

Sales & Marketing - Staff
Sales & Marketing - General
Sales & Marketing - Online Ad Spend
Sales & Marketing - Software
Sales & Marketing - Consultants
Sales & Marketing - Social Media
Sales & Marketing - Sponsorships & PR
Sales & Marketing - Commission Paid

Sometimes, it's necessary to distinguish marketing from sales. Marketing represents the efforts made to attract qualified leads to a company. Sales involve the attempts to convert those qualified leads into customers.