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Apr 7, 2025

Are You Paying Too Much to Land New Clients?

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by Alexa Taylor
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As a contractor, you're likely tracking material costs, labor hours, and job timelines closely. But there's one critical KPI for your business that often gets overlooked and can cost you more in the long run: Client Acquisition Cost (CAC).
With economic uncertainty putting pressure on margins, understanding how much you're spending to book each new client can mean the difference between growth and just getting by. Let’s break down what CAC is, how to calculate it, what drives it up, and, most importantly, how to bring it down.

What Are Client Acquisition Costs?

Client Acquisition Cost (CAC) is the total expense of attracting and converting a new client. It includes everything you invest in marketing and sales: from digital ads and lead generation platforms to website updates, CRM tools, and the time you or your team spend on prospecting.

How to Calculate Your CAC

The formula is simple:
CAC = (Marketing Costs + Sales Costs) ÷ Number of New Clients Acquired
To get an accurate number, be sure to include:
  • Digital ad spend (Google, Facebook, LinkedIn)
  • Lead services (HomeAdvisor, Angi, etc.)
  • CRM or marketing software costs
  • Any outsourced marketing support
  • Internal labor time spent on lead generation or follow-up
  • Website design, hosting, or SEO expenses
You don’t need a finance team to figure this out - just a clear view of your expenses and your closed jobs over a specific time period.
For example, if you’re spending $10,000 on marketing over a quarter and close 5 clients in that same time period, your CAC is $2,000 per client. If your average job brings in $3,000 in profit, you’re operating on thin margins.
And the tighter your margins, the less room you have for reinvestment, growth, or riding out slow seasons.

Signs Your Client Acquisition Costs Are Too High

A stressed out woman looking at her bills
Many contractors don’t even realize their CAC is a problem until it starts impacting their bottom line. But there are clear warning signs that your marketing spend may be doing more harm than good.
If you’re spending heavily on advertising or lead services but only closing a few deals, it’s a strong sign your acquisition costs are too high. Relying on third-party platforms like Angi or HomeAdvisor can make things worse. On these platforms, you may find that leads are often low quality, shared with competitors, and come at a premium. This approach drives up costs and delivers inconsistent results.
Another sign is not knowing where your leads are coming from. If you can’t identify which channels are driving your business, it’s impossible to measure performance or improve efficiency. This kind of marketing “blind spot” often leads to wasted spend.
You may also notice your marketing costs are increasing while your pipeline stays flat or shrinks. If you're putting more money into advertising and not seeing a corresponding rise in new projects, your cost to acquire each client is climbing unnecessarily.
Finally, if you aren’t tracking anything — no lead source data, no conversion rates, no cost-per-lead — you’re operating in the dark. Without data, you can’t diagnose problems or make informed decisions. And when you can’t measure, you can’t manage.
If any of these scenarios sound familiar, it’s time to reassess your approach. High CAC doesn’t have to be the norm but it’s a sign that there’s room to improve.

What’s a Reasonable CAC for General Contractors?

There’s no universal “perfect” CAC. It varies based on project size, profit margins, and close rates. However, as a general rule your CAC should be no more than 20–30% of your average project profit. If you net $4,000 per job, a CAC over $1,200 means you’re likely overspending.
It’s also important to consider the lifetime value of a client. If you’re doing one-off jobs, you need a lower CAC. If your clients tend to return or refer others, you can afford to spend a little more to acquire them.

Why Reducing CAC Matters

A woman smiling and discussing business matters with clients
When the economy tightens, homeowners delay renovations. Commercial clients get pickier. Material and labor costs fluctuate. In this environment, controlling CAC becomes one of the few levers you can reliably pull to maintain healthy margins.
Lowering CAC means:
  • Getting more out of every marketing
  • Creating predictable, scalable lead generation
  • Spending less time chasing unqualified leads
  • Having the flexibility to reinvest in staff, equipment, or operations
The more efficient your acquisition, the more resilient your business becomes.

The Most Common Marketing Mistakes That Increase CAC

Many general contractors are unknowingly overspending on marketing that doesn’t deliver. While every business has to test what works, there are several common missteps that tend to drive client acquisition costs up, often without producing better results.
Untargeted advertising is a big one. If your aren’t designed to speak directly to your ideal client, based on location, project type, or budget, you’ll burn through your budget fast. Broad, generic campaigns attract unqualified leads who are less likely to convert, and that spikes your cost per acquisition.
Overreliance on third-party lead platforms like Angi or HomeAdvisor is another culprit. While these services promise a steady stream of potential clients, the leads are often shared with competitors and come with no guarantee of quality. You end up paying a premium for cold leads that rarely close.
A neglected website is another silent drain. If your site is slow, outdated, hard to navigate, or not mobile-friendly, you’re likely losing potential clients before they even contact you. Worse, it can hurt your and make your business harder to find in local search results.
Failure to follow up promptly is a huge but overlooked issue. You may be getting leads, but if your response time is slow or inconsistent, your close rate drops. In a competitive industry, speed matters. If you’re not first to respond, someone else is.
Poor brand messaging also plays a role. If your marketing doesn’t clearly communicate what makes you different, whether it’s reliability, craftsmanship, or specialization, prospects won’t see a reason to choose you over a cheaper or more established competitor. Your message needs to do the heavy lifting, especially when you’re not face-to-face.
Each of these mistakes adds friction to the sales process and increases how much you have to spend to win business. But the good news? They’re all fixable with the right strategy and in place.

Why Tracking Your Marketing Data Is Essential

Two professionals analyzing data
If you don’t track, you can’t improve. Without clear data on where your are coming from, which ones convert, and how long it takes, you’re left guessing. And guessing is expensive.
Start by tracking the source of every lead whether it came from Google Ads, Facebook, organic search, or a referral. Monitor how long it takes to close a deal and what the lead cost you to acquire.
This data helps you understand what’s working, what’s not, and where to double down. Over time, it becomes your playbook for lowering CAC and scaling your marketing efficiently.

The Bottom Line: CAC Is a Fixable Problem

High client acquisition costs aren’t inevitable — they’re a signal that your marketing strategy needs a smarter, more efficient approach. When you understand your CAC, track your performance, and avoid the common pitfalls driving up costs, you can start spending less to earn more and put those savings back into growing your business.
At Watermark, we specialize in helping general contractors cut through the noise with custom-tailored marketing designed to attract the right clients without wasting budget. If you’re ready to turn your marketing into a more profitable, predictable engine for growth, we’re here to .

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