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How to Set Your Customer Acquisition Cost Benchmark

June 30, 2022

If you’re in business, then chances are you’ve heard of the term “customer acquisition cost” or CAC. If you’re looking to set your own customer acquisition cost benchmark, then this blog post is for you.

We’ll show you how to use our easy-to-follow formula so that you can get a benchmark for what’s considered normal in your industry.

Acquiring customers can be a costly endeavor – but it doesn’t have to be! By understanding your customer acquisition cost benchmark and using our simple formula, you can ensure that acquiring new customers is both efficient and effective.

Customer Acquisition Cost Benchmark

The median cost of acquiring a customer for tech companies with under $250 million in revenue is $27,000. Acquiring customers is an important way to grow your organization.

As a growth-minded tech CEO, you can leverage these benchmarks to evaluate your customer acquisition costs relative to those of your peers. This will give you valuable insights as you manage your overall growth journey.

What is Customer Acquisition Cost?

CAC is the total amount of money that you spend in order to acquire one new customer. This includes money spent on sales and marketing efforts, such as advertising, promotions, events, etc.

Finding the “sweet spot” is something that many startup founders have trouble with.

If you want to be successful in acquiring customers, you need to find a balance between spending too much and too little. If you spend too much, you won’t make a profit. If you spend too little, you might not reach your company’s growth potential.

Your goal is to control your CAC while hitting your customer acquisition goals.

Customer acquisition costs (CAC) can be the difference between efficient growth and startup doom. If you don’t have an unlimited budget and resources, it’s important to be aware of your CAC and how it can impact your business.

Your Customer Acquisition Cost (CAC) is a key metric that tells you how much it costs to acquire a new customer. This number is important because it helps you measure your marketing and sales effectiveness, efficiency in acquiring new customers, and whether or not you have product-market fit.

It goes without saying that you need to understand your CAC if you want to succeed in the long run.

We’ll cover everything you need to know on how much it costs to acquire a customer so your company can grow and thrive.

What’s a Good CAC Benchmark?

There are a few CAC benchmark reports floating around online. But the numbers vary so much that it’s hard to compare your own business to the data.

For instance, this study shows most industries have an average CAC of over $100, but it doesn’t account for company size, product price, and other factors.

(Source)

Your industry, target audience, and pricing all have an impact on customer acquisition costs. That makes it really difficult to benchmark against other companies.

Instead, you can use yourself as a benchmark. As long as your LTV:CAC ratio is positive, you’re likely in a good position for your startup.

How to Calculate Customer Acquisition Cost

In order to calculate your customer acquisition cost, take your sales and marketing expenses over a set period of time and divide it by the number of customers you acquired over that time period.

CAC = Sum of Sales and Marketing Expenses / # of new customers acquired

Here’s an example.

If you’ve invested $5,000 in marketing and sales efforts over the last 3 months and you’ve gained 2 new clients, then your CAC is $2,500.

One of the most common questions entrepreneurs have is which marketing and sales costs should be counted as CAC?

Any costs associated with acquiring customers over the specified period should be accounted for.

Here’s a list of some of the most common marketing and sales expenses that you would include in CAC:

  • Design for marketing materials (ad designs, landing pages, etc.)
  • Sales and marketing salaries
  • Advertising costs
  • Sales and marketing tools (CRM system, reporting tools, etc.)
  • Any other costs related to sales and marketing

If you’re already using accounting software like QuickBooks or XERO, CAC is even easier to calculate.

To take it one step further, you can input that CAC data into your forecasting software to see how it fits into the overall picture.

It’s important to track CAC as early as possible. As you test out different marketing channels, hire new employees, and experiment with other strategies, you can measure their effectiveness and adjust your strategy accordingly.

Conclusion

By understanding your customer acquisition cost benchmark, you can ensure that acquiring new customers is both efficient and effective. By comparing your CAC against others in your industry, you can get a good idea of what’s considered normal – and adjust accordingly. So don’t delay – start calculating your customer acquisition cost today!

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