How Much Do You Spend To Get New Customers?

Customer Acquisition Cost – also known as CAC it’s an essential metric in any valuation of a company, that allows you to figure out how much does it cost for you to get a new customer. It’s essential because if it cost you more to get a customer than it brings you revenue, you’re losing money and your business won’t thrive. I see many companies fall into that trap.

When you’re starting your business it’s ok to not care about this metric but as you progress you need to optimize it because it will later tell you if you will be profitable or not – and that’s very important!

How to calculate CAC?

You might find very methods that allow you to calculate your CAC, but here I’ll show you the easiest way of doing it so you don’t waste more time!

You take all the costs of sales – so think salaries, for example – multiply that value by the total cost of marketing you did and divided it by the total amount of new customers that your business acquired! It’s that simple!

Why Do I Need To Optimize CAC?

But just because it’s simple, it doesn’t mean it won’t scare you the first time you calculate it – this is a metric that you might need to optimize ASAP the first time you measure it. I’ve encountered businesses that have CAC of around $1500 (one specific client had once almost $2000 of CAC and that scared me a lot!) and to keep your business healthy with that CAC, you’ll need to charge a lot more for your products or services!

In the Resources menu (click here to open it) you will find a spreadsheet template that will allow you to track your metrics: CAC, NPS, LTV, Cohort Retention, etc… be sure to use it and grow your business!

If you are starting your own business, you now know how to make thrive!

If you want to learn about other metrics, I recommend you read “How Much Time Do Customers Use Your Products?” and “You Have To Measure This Great Metric!” – this way you’ll be a master of metrics in no time!

Do you want to recommend a topic for our blog? Send us an email to info@thedigitalguy.net with your recommendation!

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