How Much Can You Afford to Pay for a New Customer?
Knowing your target Customer Acquisition Cost changes how you think about marketing. Once you know what a customer is worth and what you can afford to spend to win one, you can test, measure and scale acquisition with much more confidence.
Use the average revenue from one new customer. For recurring customers, use their approximate value in the first 12 months.
Your target number of new customers.
This is a planning assumption, not a fixed rule. Your real allowable CAC depends on your margins, lifetime value and business economics.
This means you are prepared to invest up to approximately £2,000 to acquire one new customer.
If you can repeatedly acquire customers below your target CAC, you may have a customer acquisition channel that can be scaled.
Now you have a number to work towards. Instead of asking "Should we spend £500 on ads?" you can ask "Can we repeatedly acquire a new customer for £2,000 or less?" That is the number you can use to judge Google Ads, Meta, outbound, partnerships and other acquisition channels.
Why CAC Changes the Way You Grow
Know what a customer is worth
Understand the commercial value of winning a new customer.
Set an acquisition target
Decide what you are prepared to invest to win one.
Test and scale
Find acquisition channels that repeatedly generate customers below your target CAC.
The goal is not cheap marketing. The goal is profitable, repeatable customer acquisition.
Want help building a predictable customer acquisition system?
KAYBOX helps B2B companies build the targeting, outreach, follow-up and sales systems needed to create a more predictable pipeline.