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Customer acquisition cost (CAC) answers a simple question: what does it cost you, all in, to win one new job? Cost per lead tells you what a vendor charges. CAC tells you what your whole marketing and sales machine costs per signed customer — and whether growth is making you richer or just busier.
The formula
CAC = total marketing and sales costs for a period ÷ new customers won in that period
The hard part isn't the division. It's deciding what goes in the top line.
What to include
| Include | Examples |
|---|---|
| Lead and appointment spend | Vendors, aggregators, appointment setting |
| Advertising | Search, social, Local Services Ads, mail, events |
| Agency and software fees | Marketing agency retainers, CRM, call tracking, dialers |
| Sales labor | Reps' base pay and commissions, sales manager time |
| Office labor spent on leads | Coordinators who call, book, and confirm |
| Sales expenses | Vehicle costs and fuel for estimates, samples, presentation materials |
Some contractors keep sales commissions out of CAC because they treat them as a job cost. Either approach works if you're consistent — just don't count commissions in both CAC and gross margin.
A worked example
Illustrative month for a remodeling company:
| Cost | Amount |
|---|---|
| Lead sources and ads | $18,000 |
| Sales reps (base and commissions) | $16,000 |
| Office time on leads (share of payroll) | $3,000 |
| Software and tools | $1,000 |
| Total | $38,000 |
New customers that month: 14. CAC ≈ $2,700. With an average job of $16,000, acquisition costs about 17% of revenue per job. Whether that's healthy depends on gross margin — a 45% margin leaves plenty to cover overhead; a 25% margin may not.
CAC by channel
Company-wide CAC hides which channels are pulling their weight. Allocate direct costs (vendor invoices, ad spend) to each channel, then split shared costs (sales labor, software) by the share of appointments each channel produced. Compare channels on CAC and on revenue per customer. A channel with higher CAC can still win if it brings bigger jobs. The lead ROI calculator guide shows a simple layout.
Healthy CAC is relative
Judge CAC against what a customer is worth:
- Gross profit per job — the first and most important comparison
- Lifetime value — repeat projects and referrals, measured rather than assumed; see customer lifetime value
- Payback — how quickly gross profit from the job covers the acquisition cost
If CAC creeps toward gross profit per job, every new customer is close to breaking even, and growth becomes dangerous.
Ways to lower CAC
- Raise close rate. It's the biggest lever. Better presentations, options, and follow-up lower CAC without touching marketing spend. See how to close more in-home estimates.
- Respond faster. Leads that wait cost the same and close less. Start with a response time audit.
- Cut no-shows. Paid appointments that never happen inflate CAC. See reducing no-shows.
- Work your database. Reactivating past leads and unsold estimates costs little. See reviving dead leads.
- Shift spend to the lowest cost per sale, not the lowest cost per lead.
- Build referrals. Referred customers are usually the cheapest to acquire.
- Align pricing models with outcomes. Paying per sit or on commission moves some risk off your CAC; see commission-only lead generation.
Frequently asked questions
How do you calculate customer acquisition cost for a contractor?
Add up all marketing and sales costs for a period — lead spend, advertising, software, sales labor, and office time spent on leads — and divide by the number of new customers won in that period.
What is a good customer acquisition cost for home improvement?
It depends on your job size and gross margin. Compare CAC with gross profit per job: it should leave enough to cover overhead and profit. A higher CAC can be fine for large, high-margin projects.
Should sales commissions be included in CAC?
You can include them in CAC or treat them as a job cost in gross margin, but not both. Pick one method and use it consistently.
What's the fastest way to lower CAC?
Improving close rate and response speed usually lowers CAC fastest, because they make the leads and appointments you already pay for more productive.
RunsForYou Team
Written by the team that runs outbound calling, homeowner qualification, and appointment booking for home service contractors at RunsForYou (Runs For You LLC).
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