Customer Acquisition Cost
The total spend required to acquire one new paying customer. Compared against lifetime value to determine whether your marketing is profitable.
Also known as: CAC
The total spend required to acquire one new paying customer. Compared against lifetime value to determine whether your marketing is profitable.
Also known as: CAC
Customer Acquisition Cost (CAC) is the total spend required to acquire one new paying customer. It includes ad spend, sales labor, marketing tool costs, and any other expenses tied to getting a new customer in the door.
The formula is simple: total marketing and sales spend divided by new customers acquired in the same period.
CAC by itself is only useful when paired with Customer Lifetime Value (LTV). The ratio of LTV to CAC tells you whether your business is sustainable:
For most service businesses, the goal is a 3:1 to 5:1 ratio — high enough to be profitable, low enough that you’re not under-spending on growth.
Total marketing + sales spend over a period (typically a month or quarter), divided by the number of new paying customers acquired in that same period.
Marketing spend includes:
The output is your blended CAC across all channels. To get more useful, calculate per-channel CAC — Google Ads CAC vs. organic SEO CAC vs. referral CAC — to see which channels actually pay for themselves.
Typical CAC ranges by acquisition channel for home service businesses in 2026:
Run our customer lifetime value calculator to find your max acceptable CAC at a 3:1 ratio, then compare against your real per-channel CAC. Channels above your threshold should be cut or fixed; channels below it should be scaled.
The percentage of leads (or quotes) that convert to paying customers. The single most important sales metric for a service business.
The free Google listing that controls how your business appears in Google Search, Maps, and the local pack. The most important free marketing asset for any service business.
Free content or a free tool offered in exchange for a contact's information. Used to capture leads at the top of the funnel.
The block of three businesses with map, ratings, and contact info that shows up at the top of local Google searches. The most valuable real estate in local SEO.
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