Customer Acquisition Cost (CAC)
It is what you spent in ads, outreach, and sales time to land each new client.
Formal definition
Customer acquisition cost equals total sales and marketing spend to win new clients divided by the number of new clients acquired in the period.
Why it matters
Agencies that spend more to win a client than the first project earns are buying growth at a loss.
Where you see it
- Agency growth playbooks
- Venture and SaaS metric blogs applied to services
- Marketing ROI reviews
- Private equity agency diligence
- Freelance scaling workshops
Worked example
- Marketing + sales spend: $6,000.
- New clients won: 3.
- CAC = $6,000 ÷ 3 = $2,000 per client.
- Interpretation: Each new client cost $2,000 to acquire this quarter.
How Business metrics calculates it
Marketing spend ÷ New clients won.
Where people fool themselves
CAC dividing all marketing by “new clients” when half of spend is brand for retainers will look expensive. Split hunt vs. garden if you can.
Run it on your own numbers: the Freelance & Agency calculator.