How to Calculate Customer Acquisition Cost for a Local Service Business

What CAC is

Customer Acquisition Cost is exactly what it sounds like: the total cost to acquire one new customer. The basic formula:

CAC = Total sales & marketing spend ÷ New customers acquired

Spend $4,000 in a month and win 40 new customers, and your CAC is $100. Simple — but the number only matters when you compare it to what a customer is worth.

CAC only makes sense next to LTV

A $100 CAC is fantastic if a customer is worth $2,000 over their lifetime and terrible if they’re worth $80. That’s why CAC lives alongside Customer Lifetime Value — the LTV:CAC ratio is one of the most important numbers in your business (customer lifetime value). A healthy ratio means every marketing dollar returns several; a poor one means you’re paying too much to grow.

Calculate it properly

1. Add up all acquisition spend — ads, marketing tools, the marketing portion of salaries, agencies, lead fees.
2. Count new customers from that period.
3. Divide. That’s your blended CAC.
4. Then go deeper — by channel. Blended CAC hides winners and losers; calculate it per channel to see what actually pays (cost per lead by channel).

Use call tracking to attribute customers to sources accurately (call tracking).

How to lower your CAC

• Shift budget to your best channels — kill high-CAC sources, feed low-CAC ones.
• Raise conversion — faster response and better booking win more from the same spend (response time, CSR script).
• Lean on owned channels — SEO, referrals, and reviews cost far less than paid leads (buying vs owning).
• Retain and refer — repeat and referred customers have near-zero CAC (referral program).

Reviews are the ultimate CAC-reducer

Here’s the leverage: reviews lower CAC across every channel at once — they rank your profile, lift ad conversion, drive direct calls, and spark referrals, all at almost no marginal cost. The more reviews you have, the cheaper every new customer gets. Tailwind builds that review engine automatically after each job — see how it works, and model the impact with the review ROI calculator.

Know what customers cost, then pay less. See how Tailwind works.