Acquisition cost refers to the total cost that a company recognizes on its books for property or equipment after adjusting for discounts, incentives, closing costs, and other necessary expenditures, but before sales taxes. It can also describe the costs incurred by a business in relation to the efforts involved in acquiring a new customer. The term is used in different contexts, and the following are some examples of acquisition costs:
- Fixed assets: Acquisition cost is the amount paid for fixed assets, including expenses related to their acquisition.
- Business acquisition: Acquisition cost can also refer to the amount needed to take over another firm or purchase an existing business unit from another company.
- Customer acquisition: Acquisition cost can describe the costs incurred by a business in relation to the efforts involved in acquiring a new customer.
In the context of customer acquisition, acquisition cost is also known as customer acquisition cost (CAC) . CAC is the cost of winning a customer to purchase a product or service. It is calculated by dividing the total marketing costs to acquire new customers by the total number of customers acquired in a defined period. CAC is an important metric for businesses to understand because it helps them gauge how much they are spending to gain a customer and how much revenue they can expect to generate from that customer over their lifetime. By tracking CAC, businesses can manage their expenses, see their growth, predict their future moves, and expand if the business allows.
