Can You Afford a Customer? CAC, Margin and Payback — Digital Marketing & SEO Foundations

Revenue is not what you keep

A customer who pays CHF 160 does not leave CHF 160 in your pocket. Parts, materials, payment fees and work paid per job come off first. What is left is the contribution margin: the money each order contributes towards rent, fixed salaries and profit. Marketing decisions should rest on this number, not on revenue.

Metric	Formula	Example
CAC (customer acquisition cost)	Total acquisition cost ÷ new customers	CHF 1,000 ÷ 20 = CHF 50
Contribution margin per order	Average order value − variable costs per order	CHF 80 − CHF 50 = CHF 30
Payback in orders	CAC ÷ contribution margin per order	CHF 50 ÷ CHF 30 = 1.7 orders
Lifetime contribution	Margin per order × expected orders per customer	CHF 30 × 5 = CHF 150

CAC: count all of it, divide by the right people

Customer acquisition cost is what you spend to win one new customer. Two details decide whether the number is honest. First, include the full cost of the channel: ad spend, agency or freelancer fees, and tools you pay for the campaign. Second, divide by new customers only. Existing customers who click an ad after searching for your name were not won by that ad. Counting them makes the channel look cheaper than it is.

Payback: when does a customer become profitable?

Payback compares CAC with the margin a customer brings. If CAC is CHF 50 and each order contributes CHF 30, the acquisition cost is paid back after about 1.7 orders. In a shop where most people buy only once, a CAC above the margin of one order means each sale from that channel loses money. In a business with regular customers, a longer payback can be fine, but only if customers really come back. Check how often they return in your booking system or till data before you rely on it.

Lifetime value, handled carefully

Lifetime value is the total contribution a customer brings over the whole relationship. It is useful and easy to overestimate. Use margin, not revenue. Use a limited time frame, such as three years, not 'forever'. Base return rates on your own records. Many businesses want lifetime contribution to be several times higher than CAC, because the calculation always misses some costs. Treat that as a rule of thumb, not a law.

The common mistake

Comparing CAC with revenue. 'A new customer costs CHF 90 and spends CHF 150, so we earn CHF 60' ignores the costs behind the order. If those costs are CHF 105, the margin is CHF 45. The first order then loses CHF 45, and the customer only breaks even with a second order. Another version of the mistake is trusting the cost per conversion in an ad platform as CAC. It may count returning customers, and it leaves out fees.

Worked example

Back to Lena's first month of ads from lesson two: CHF 600 ad spend and 6 paying customers, CHF 100 each on paper. But she also paid a freelancer CHF 300 to set up and manage the ads. And her booking notes showed that 2 of the 6 were existing customers who had searched for 'velo kessler' and clicked the ad. The honest CAC: CHF 900 ÷ 4 new customers = CHF 225. That was far more than a customer brought in during their first year. It confirmed that fixing the page came first.

Do this now

Take your most expensive channel. Add up last month's full cost for it. Count only the new customers it brought. Look up your average order and the variable costs behind it. Calculate CAC, contribution margin and payback in orders. If payback needs more orders than a typical customer actually places, stop increasing that budget until the funnel improves.

💡 Keep a simple habit: ask every new customer how they found you, and write the answer in the booking. It is not perfect data, but it is the easiest way to separate new customers from returning ones.

Knowledge check

A shop's ads cost CHF 2,000 and brought 50 orders: 40 from new customers and 10 from returning customers. What is the CAC?

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