What's a Healthy CAC?
Client acquisition cost is the number no one measures but everyone should. Most firm leaders can quote utilization and margin, then go quiet when you ask what it costs to win a client. We'll work through how to measure it, what healthy looks like, and the leadership question underneath it: who you hire, and what an AI-forward exec team needs to be.
There's one number most consulting leaders have never worked out.
What does it actually cost to win a client?
Utilization they know to a decimal point. Last month's margin they can recite from memory. The cost of winning the work that feeds all of it stays off the dashboard. That number is your client acquisition cost, and in a firm that sells time and expertise it behaves nothing like it does in a software company.
Dominique Rennell, our CCO, has watched leaders track everything except this for years.
This episode of the podcast takes it on, with Mark Orttung and guest Mark Easton, founder of Nodero, working through what a healthy client acquisition cost actually looks like for a consulting firm, and the harder leadership question underneath it.
What is CAC?
CAC (or Client Acquisition Cost) is what you spend to win new work, divided by the number of clients you win.
In a software business that spend is mostly advertising and a sales team. In a consulting firm the largest line item is quieter and harder to see. It is the non-billable time your billable people pour into winning work, from the scoping calls to the tailored deck to the pricing debate to the two or three senior people pulled off client work to write the proposal. Mark Orttung framed the real weight of that on the previous episode, on the cost of every proposal.
What client acquisition cost really means in consulting
Start with the definition, because it is simpler than the acronym makes it sound. Your client acquisition cost is what you spend to win new work, divided by the number of clients you win. CAC for short. In a software business that spend is mostly advertising and a sales team. In a consulting firm the largest line item is quieter and harder to see. It is the non-billable time your billable people pour into winning work, from the scoping calls to the tailored deck to the pricing debate to the two or three senior people pulled off client work to write the proposal. Mark Orttung framed the real weight of that on the previous episode, on the cost of every proposal.
The people best placed to win the work are the same people you most need billing, so every hour they spend on a proposal is an hour the firm never invoices. Acquisition cost can be tied directly to whether a firm can grow on purpose rather than by luck. If you make growth repeatable, then the cost of winning work stops being a mystery and starts being a lever you can pull.
In consulting, is it CAC or CLC?
In a consulting firm, your first sale is rarely the real relationship. It is usually a pilot, which is why it is worth questioning whether CAC even fits a business that works this way.
If the first project is a tryout, then the cost of winning that one project is the wrong thing to optimize. What matters is the cost of winning, growing, and keeping the whole relationship.
The answer is to stop thinking of in terms of CAC, and reframe it as CLC, or client lifetime cost.
It adds up the cost to win a client, grow the account, and keep it, then divides by the number of clients.
What a healthy ratio looks like
So what should you aim for? Our own rule of thumb, and it is a rule of thumb rather than a sourced benchmark, runs in three bands. Under 3:1 is not healthy. Around 5:1 is healthy. Get to 10:1 and you are either leaving growth on the table by under-investing, or you are the kind of firm someone wants to acquire. Easton's advice is to hold numbers like these loosely, treating a benchmark as a mast to work toward and adjust from rather than a law. Every firm is different, and the point of the band is to give you somewhere to start, not somewhere to stop.
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