Margin One
What Is a Good CAC and LTV:CAC Ratio for Home Services?
A healthy customer acquisition cost is about $200 to $350 per new customer, and a good lifetime-value-to-CAC ratio is above 3 to 1.
By Chris
A healthy customer acquisition cost (CAC) for home services is roughly $200 to $350 per new customer, and a good lifetime-value-to-CAC ratio is above 3:1. CAC = (sales + marketing spend) ÷ new customers. If you earn back less than three dollars of lifetime value for every dollar spent acquiring a customer, growth is not paying for itself. These benchmarks come from the Home Services Metrics Scorecard that M1COS dashboards run on.
A healthy customer acquisition cost (CAC) for home services is roughly $200 to $350 per new customer, and a good lifetime-value-to-CAC ratio is above 3 to 1. Together they tell you whether growth is actually paying for itself.
CAC = (Sales + Marketing Spend) ÷ New Customers
Spend $10,000 on sales and marketing in a month and win 40 new customers, your CAC is $250, right in the healthy band. Note that CAC counts new customers, not leads and not jobs. A repeat customer who books again is not a new acquisition, and folding them in will make your CAC look better than it is.
CAC on its own is only half the story. A $300 CAC is a bargain if that customer is worth $3,000 over their lifetime and a disaster if they are worth $400. That is what the LTV:CAC ratio captures.
LTV:CAC = Customer Lifetime Value ÷ CAC
| LTV:CAC | What it means |
|---|---|
| Above 3:1 | Healthy: every acquisition dollar earns back 3+ in lifetime value |
| 1:1 to 3:1 | Thin: growth is barely paying for itself |
| Below 1:1 | Losing money on every new customer |
Above 3:1 is the line because you are not just covering the cost of acquisition, you are covering it several times over, which leaves room for overhead and profit. Below that, you are buying growth that does not fund itself, and scaling spend only speeds up the bleed.
The common mistake is optimizing CAC in isolation. Cutting CAC by chasing the cheapest customers often lowers lifetime value even faster, and the ratio gets worse while CAC looks better. Manage the ratio, not the input. The other frequent error is undercounting spend: CAC includes sales cost and fully loaded marketing, not just ad dollars.
These benchmarks come from the Home Services Metrics Scorecard, the KPI catalog the M1COS dashboards run on.
CAC starts with what you pay per lead, so read this with What Is a Good Cost Per Lead for Home Services? and What Is a Good Estimate Close Rate for Contractors?, since lead cost and close rate together drive CAC. To see where acquisition spend is outrunning its return, run the Margin Leak Check.
FAQ
What goes into customer acquisition cost?
All sales and marketing spend over a period, divided by the number of new customers won in that period. Include salaries, ad spend, and tools, not just the ad bill.
Why does the LTV:CAC ratio matter more than CAC alone?
Because a high CAC can be perfectly healthy if lifetime value is high enough. The ratio tells you whether each acquisition dollar earns its keep; a number above 3:1 means it earns back at least three times over.
What if my LTV:CAC is below 3:1?
Growth is barely funding itself or losing money. Look at raising lifetime value through repeat work and memberships, and at whether you are acquiring low-value customers cheaply, before you add spend.
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