Do you know your CAC?

Posted by Todd Gibbings on

Do you know what your CAC is? Do you even know what a CAC is and how to calculate it?

Many start in the window cleaning business without a business plan or marketing plan. When money is started to be put into marketing, often the decision of whether it was worth spending is more based on gut feeling than a number.

CAC stands for customer acquisition cost. Effectively, if our CAC is $50, if we want 10 new customers, we will need to spend $500 on marketing.

CAC is calculated by adding all your marketing costs and dividing by the number of new customers for that period.

Example

Monthly Adwords budget $200

Monthly flyers for direct mail $200

Monthly sponsorship of community group $100

Monthly Facebook Ads $300

New customers this month 18

(500+300)/18 = $44.44

Working this equation over a longer period such as a year will give you a better indication of your true CAC, but we can run it monthly to understand how the cost varies during peak season versus quiet season. Running the same budget in December and July may give us 80 new clients in December but only 10 new ones in July (CAC $10 vs $80). 

Knowing this information, we can appreciate the cost of each new customer and want to be able to maximise our revenue to give a higher ROI (return on investment).  3 ways to maximise this is up-selling, repeat business and referrals. 

Up-selling - if a customer books a single storey window clean, we may be able to offer additional service/s such as pool fence cleaning, solar panels or gutter cleaning. If during the month the 18 new customers averaged $200 per initial booking, The revenue from the advertising would of been $3600. If we managed to up-sell 3 each of the pool fence @ $50 each, solar panels $100 each and gutter cleaning $150 each, the revenue has now increased to $4500.

Repeat business - if a window cleaner is paying for advertising, they don't just want a one off revenue but ongoing revenue. If during peak season we can pick up new customers at a lower CAC for example we can get 80 new ones in December for the same price as 10 new ones in July. When we have our influx of new customers in December we need to attempt to secure a repeat booking before leaving. If we have 80 jobs in December and are able to secure 25% who agree to a booking in June we have got a potential $4000 worth of work for a quieter month without spending any additional money on advertising.

Referrals - leaving a few cards with a customer at the end of a job and asking for them to pass them on to any friends or family who may want to use your services is an easy way to get new customers with no cost. This helps reduce your CAC over time so you are spending less to acquire your new customers.

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