Customer acquisition cost (CAC)

Customer acquisition cost is calculated by dividing all acquisition spend — advertising, commissions, prospecting time — by the number of new customers won over the same period. The important nuance for a solo operator: your time counts. Three hours spent handing out flyers are worth what those hours would have earned you on a job.

CAC is always read against customer lifetime value: the rule of thumb says a customer should be worth at least three times what they cost to acquire. The angle local businesses overlook: the phone silently inflates CAC — every paid lead (often $25 to $100 in local services) then missed because nobody answered is acquisition spend that bought zero customers. Answering is the cheapest CAC reduction on the market.