One of the secrets to an unlimited marketing budget, is knowing how to calculate customer acquisition cost (CAC).
And by the end of this post, you’ll know exactly how to go about it…
Plus I’ll reveal little known details that’ll give you an almost unfair advantage over 99% of your competition (because they are clueless about these things).
Now let’s get started…
The calculation is very simple – just use this “customer acquisition cost formula”:
Money Spend on Customer Acquisition / Number of New Customers = Customer Acquisition Cost
And if you actually do the calculation for your business.
Then you’re already ahead of most of the competition.
Because most business owners don’t know this number.
But to get the most of this very useful metric, we have to get a little more advanced than this.
First of all you’ll have to know…
How to Calculate Customer Acquisition Cost by Source
Have you ever heard this quote?
“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
– John Wanamaker
Wanamaker points to a very real problem for many business owners.
But if he knew what I’m about to tell you, his problem would be solved…
You see, if you use the above formula for each customer source in your business (just remember to set up tracking mechanisms, so you know where each customer comes from and how much you spend on each source).
And you know how to calculate customer lifetime value.
Then you’ll instantly see where you are wasting money and where you are getting a good return on your investment.
Now imagine what would happen to your profits, if you eliminated all sources that is costing you money and started spending the difference on the sources that actually make money…
(I’ve seen unprofitable businesses become profitable. And already successful businesses triple their profits. Just using this simple strategy).
Pretty exciting, right?
And now that you know how to calculate customer acquisition cost.
All you have to do is start using this metric to increase profits in your business.
And if you own a business that does at least €250K in sales per year (or the equivalent in another currency).
Then I’ll be happy to take a look at your customer acquisition strategy and tell you exactly what you can do to increase profits.