Calculate CAC. Measure marketing efficiency. This tool helps you calculate, understand, and optimize this metric for your business.
Each customer is worth 3.6 times what it costs to win them, which leaves room to spend more on acquisition.
CAC is total marketing and sales spend divided by the number of new customers it won. On its own it is just a number; it becomes useful when you compare it against what a customer is worth over the time they keep buying.
A ratio of roughly three times value to cost is a common rule of thumb for a healthy position, but the right number depends on your margins and how long customers stay.
Include everything that went into winning customers, not only the advertising: promotions, commissions, the time of whoever does the selling.
For customer value, count repeat purchases. Businesses that measure a customer by one transaction almost always conclude their marketing does not work, because on that basis it usually does not.
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