- Cost per lead = marketing cost ÷ leads. Customer acquisition cost = sales and marketing cost ÷ new customers.
- Decide what to include (people, tools, agencies, ad spend) and keep it consistent month to month.
- Calculate by channel to see where your money and time work hardest.
- Compare CAC with what a customer is worth over the relationship, not just the first sale.
Cost per lead vs customer acquisition cost
Two numbers answer the question "what is our marketing costing us?":
| Metric | Formula | Tells you |
|---|---|---|
| Cost per lead (CPL) | Marketing cost ÷ number of leads | How efficiently a channel produces enquiries |
| Customer acquisition cost (CAC) | Total sales and marketing cost ÷ number of new customers | What it costs to win a customer, all in |
CPL is useful week to week, because leads come quickly. CAC is the more important number, because a cheap lead that never buys isn't cheap. For definitions, see the glossary entries for cost per lead and CAC; this guide is about calculating and using them.
How to calculate cost per lead
Cost per lead = marketing cost for the period ÷ leads in the same period
- Choose the period: a month or a quarter.
- Decide what counts as a lead: usually a form submission, call or email enquiry. Exclude spam, job applications and supplier pitches.
- Add up the cost: for a single channel, the ad spend and any agency or tool fees for that channel; for all marketing, everything in the next section.
- Divide.
Example (illustrative figures): a firm spends 1,500 on search ads and 300 on agency management in a month and receives 30 leads from that campaign. CPL = 1,800 ÷ 30 = 60 per lead.
Calculate a cost per qualified lead as well, counting only enquiries that fit your ideal customer. It's often a very different picture.
How to calculate customer acquisition cost
Customer acquisition cost = total sales and marketing cost for the period ÷ new customers won in the period
What to include
| Include | Notes |
|---|---|
| Advertising spend | All paid channels |
| Agency, freelancer and consultant fees | For marketing and sales work |
| Marketing and sales tools | CRM, email platform, website tools, analytics, design software |
| Salaries of people working on marketing and sales | Or the share of time they spend on it |
| Content and events | Production, sponsorship, stands, travel |
| Website costs | Hosting, development and maintenance, if you treat the site as a marketing cost |
Whatever you include, keep it consistent so the number is comparable over time. If you leave salaries out, call it "paid CAC" so nobody mistakes it for the full figure.
Worked example (illustrative figures)
A firm's quarter:
- Marketing salaries (share of time): 12,000
- Sales salaries (share of time on new business): 9,000
- Ads: 4,500
- Tools: 1,500
- Freelance design and content: 3,000
- Total: 30,000
- New customers won: 10
CAC = 30,000 ÷ 10 = 3,000 per new customer.
Allow for the sales cycle
In B2B, a lead in January may become a customer in May. For long sales cycles, either calculate CAC over a longer period (a quarter or a year), or match costs to the period the customers were generated. Be consistent either way.
Calculate it by channel
The overall figure tells you whether marketing is affordable. The per-channel figure tells you where to put the next pound or hour.
| Channel | Cost in period | Leads | Qualified leads | Customers | Cost per qualified lead | CAC |
|---|---|---|---|---|---|---|
| Organic search | [content + tools + time] | |||||
| Google Business Profile | [time] | |||||
| Paid search | [ads + fees] | |||||
| [ads + time] | ||||||
| Events | [stand + travel + time] | |||||
| Referrals and partners | [time] |
To fill this in, you need to know where each enquiry came from. Tag campaign links with UTM parameters (see UTM tracking), record the source in your CRM, and ask "How did you hear about us?" on forms and calls.
Organic channels such as SEO and content have mostly fixed costs, so their cost per lead tends to fall as they build up. Paid channels have costs that rise with volume.
How to use the numbers
- Compare CAC with customer value. What is a typical customer worth in gross profit over the whole relationship? If CAC is a large share of that, growth is expensive; if it's small, you can probably afford to spend more to win more.
- Compare channels on cost per qualified lead and CAC, not cost per lead alone.
- Watch the trend. Rising CAC can mean a channel is saturating, competition is increasing, or sales conversion is slipping.
- Report it monthly or quarterly. It belongs in your marketing KPIs.
Common mistakes
- Counting all enquiries as leads, including spam and job applications
- Leaving out people's time, then wondering why "free" channels feel expensive
- Comparing channels on cost per lead when their lead quality differs widely
- Judging a channel after one month in a long sales cycle
Questions
How do you calculate customer acquisition cost?
Add up your sales and marketing costs for a period, including ads, tools, agencies and people's time, then divide by the number of new customers won in that period.
How do you calculate cost per lead?
Divide the marketing cost for a period by the number of leads in the same period. For one channel, use only that channel's costs and leads.
What should be included in CAC?
Advertising, agency and freelancer fees, marketing and sales tools, the share of salaries spent on winning new business, content and events. Keep the definition consistent over time.
What is a good customer acquisition cost?
It depends on what a customer is worth. Compare CAC with the gross profit a typical customer brings over the whole relationship, and with how quickly you earn back the cost.
What's the difference between cost per lead and cost per acquisition?
Cost per lead measures the cost of an enquiry. Cost per acquisition usually measures the cost of a completed action further down the funnel, such as a sale or sign-up. In B2B, customer acquisition cost is the most useful version.
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