How to Calculate Contractor Customer Acquisition Cost (CAC)

Contractor customer acquisition cost (CAC) is everything you spend to win new customers in a period divided by the number of new customers. It goes past lead fees to include estimator time, office labor, software and return visits. It's the final rung in the cost-per-job guide, and always the biggest number.

The formula

CAC = (Lead costs + Sales labor + Office labor + Tools + Return-visit costs) / New customers

Each term in plain terms:

• Lead costs: fees paid to lead sources, ad spend, memberships, minimums.
• Sales labor: estimator or owner time on appointments, including drive time and estimates that didn't sell.
• Office labor: time answering, calling back, and scheduling.
• Tools: call tracking, CRM, quoting software, attributable to acquisition.
• Return-visit costs: cost of callbacks on jobs that came out wrong, assigned to the source that sent them.

Use one time period for every term, and count new customers only. A repeat customer who calls back for a second repair came from your last job, not from this period's marketing.

Step 1: Pick the period and the scope

Choose a month or quarter. Decide whether you're computing CAC for the whole business or for one source. Start with the whole business, then split by source once the logging is in place (see how to tell which leads became jobs).

Step 2: Add up lead costs

Pull the invoices. Include fees that aren't per lead, such as profile placement or monthly minimums. If a source credits you for invalid calls, net those out, but don't net out the leads that were merely hard to close.

Step 3: Price your sales time

This is the term most owners skip, and it's often the second-largest.

Sales labor = Appointments x Hours per appointment x Loaded hourly cost

Hours per appointment includes drive time, the walk-through, writing the quote and the follow-up. Loaded hourly cost is wages plus payroll taxes, truck and fuel, and benefits. If you quote yourself, use what a hired estimator would cost.

Count every appointment, including the ones that didn't close. An estimate that doesn't sell still cost the visit.

Step 4: Price your office time

Count inbound calls answered, plus outbound callbacks to people you missed. A callback to a lead who didn't pick up is acquisition work. It's easy to overlook because it happens in five-minute gaps.

Office labor = (Calls x Minutes per call + Callbacks x Minutes per callback) / 60 x Loaded hourly cost

If your office staff are paid for the whole day regardless, this is an allocation, not a new expense. Include it anyway. The question you're answering is what each source asks of your team.

Step 5: Allocate tools

Add the part of call tracking, CRM and quoting software you'd drop if you stopped acquiring customers. If a subscription also runs your dispatch, count only the acquisition share.

Step 6: Add return-visit costs

Callbacks are a judgment call. Strictly speaking, a warranty return visit is a job cost and belongs in margin. But there's a reason to track it by source: some sources send homeowners who want a different job than the one you quoted, and the callbacks show it.

Keep two numbers. Report CAC without return visits as your standard figure, and CAC with return visits when you compare sources. Either way, label which one you're showing.

A worked example (illustrative numbers)

This is a hypothetical month for one crew. The figures are made up to show the arithmetic. Replace them with yours.

• 100 inbound calls bought at $60 each.
• 40 booked estimates, 14 signed jobs (14 new customers).
• Estimators are paid a loaded $45 an hour and spend 1.5 hours per appointment.
• Office staff cost a loaded $25 an hour, spend 12 minutes on each of the 100 calls, and make 30 callbacks at 10 minutes each.
• Tools allocated to acquisition: $300.
• Two return visits on the month's jobs at $180 each.

CAC = $9,985 / 14 = $713.21.

Without return visits the total is $9,625, so CAC is $687.50. Counting lead fees alone gives $6,000 / 14 = $428.57. Here the full figure is about two-thirds higher than the lead-fee figure, which is the gap that makes a source look cheaper than it is.

Read CAC against gross profit

CAC alone isn't good or bad. Compare it with what a customer leaves you.

Suppose the average job in this example leaves $2,400 in gross profit. Then:

• CAC as a share of first-job gross profit: $713.21 / $2,400 = 29.7%.
• Gross profit left after acquisition: $2,400 - $713.21 = $1,686.79 per customer.
• Month total: 14 x $2,400 = $33,600 gross profit, minus $9,985 = $23,615.

If the customer only ever buys one job, that's the picture. If they sign a maintenance plan or send you referrals, the picture improves, which is the subject of contractor lifetime value by trade. For how much lead cost a job's margin can carry, see gross margin and lead cost for contractors.

Splitting CAC by source

A whole-business CAC hides which source is carrying the rest. Once your log shows which source sent each call, split the terms.

Lead costs are direct: each source's invoices. Sales labor follows the appointments each source produced. Office labor follows its calls and callbacks. Tools are shared, so allocate them by share of calls or leave them in a general pool. Return visits go to the source that sent the job.

Here's the same hypothetical month split across two sources. Source A is the 100 calls above. Source B is a second, cheaper source, with illustrative numbers: 100 form leads at $30 each ($3,000), 22 appointments, 5 signed jobs.

The cheaper source costs half as much per lead and about 57% more per customer in this example, mostly because few of its leads reached an appointment and fewer closed. Your numbers will differ. The point of the split is to see yours.

Common mistakes

• Using lead fees only. That's cost per job, a good number, but a partial one. The cost per call vs cost per job page covers that rung.
• Counting repeat customers. They inflate the denominator and make CAC look lower.
• Leaving out unsold estimates. Drive time to a visit that didn't close still gets paid.
• Mixing periods. A June estimate that signs in August belongs to a consistent rule. Pick one (appointment date or signing date) and stick with it. Long sales cycles, like roofing or siding, make this a bigger issue.
• Ignoring owner time. If you quote, price it.

When CAC signals a problem

Look at which term moved, not just the total.

• Lead costs rising while customers stay flat: the source got worse, or your answering slipped.
• Sales labor rising: you're running more appointments per sale. Tighten phone qualifying.
• Office labor rising: many missed calls forcing callbacks. See what to do with missed calls.
• Return visits rising: scope or fit problems with one source.

Choosing a time lag

Customers who sign this month came from leads that arrived earlier. For fast-turn work like repairs, the lag is a few days and you can ignore it. For roofing, siding or remodeling, divide this quarter's spend by customers who signed from the same cohort of leads, even if some signed later. Otherwise a growing business looks cheaper than it is in busy months and pricier in slow ones. Lead attribution windows explains how to set the cutoff.

Using CAC in a budget

Once CAC is known, you can work backwards from the number of jobs you can staff to the lead spend you need, which is the logic in marketing budget for home-service contractors. If you're considering exclusive inbound calls, pay-per-call puts a price on each qualifying call, and applying at RankLocal lets you test it. Run the same CAC math on it that you ran above.

Frequently asked questions

What is customer acquisition cost for a contractor?

It's everything you spend to win new customers in a period, divided by the number of new customers you won. That includes lead fees, but also estimator time, office time, software and return visits tied to the source.

Are warranty callbacks part of CAC?

Strictly, they belong in job cost. Tracking them by lead source is still useful, because a source that sends poor-fit jobs will show it in return visits, so many owners add them to a source-level CAC.

How often should I recalculate CAC?

Quarterly works for most shops, and monthly if you're testing a new source. Estimator cost and close rate drift with season and staffing.

Should I include the owner's time in CAC?

If the owner runs estimates or answers calls, yes. Price that time at what it would cost to hire someone to do it, or CAC will look better than it really is.