What a Customer Is Worth: CAC and LTV for New Zealand Businesses

Before we rebuilt it, one Auckland property management account was paying around $99 a lead, blended across the whole account. One campaign inside it spent over $1,300 and produced two leads. Another spent more than $1,200 on a single conversion.

The owner did not know any of that. What he knew was that Google Ads “wasn’t really working”. The reporting he was getting showed clicks and impressions going up.

We rebuilt the account for Ray White Austar around genuine rental-appraisal intent, with one landing page and one clean conversion action, and it settled at $54 per qualified rental appraisal across 105 leads. That is a real number from a real account, and it is still not the number that decides whether the campaign made him money.

Cost Per Lead Is Not Customer Acquisition Cost

Cost per lead is what you pay to get someone to raise their hand. Customer acquisition cost is what you pay to end up with someone who actually pays you. The gap between the two is your close rate, and almost nobody measures it.

Here is the arithmetic. If leads cost you $54 and you sign one in five, each signed customer cost you $270 in media. Sign one in twenty and the same $54 lead becomes a $1,080 customer. Same ads, same spend, same reporting dashboard, and a four-fold difference in what a customer actually costs.

Two things get left out of most CAC numbers, and both of them are real money:

Agency or management fees. Whatever you pay an agency to manage your ads, on top of the spend itself, is part of your acquisition cost, not a separate line item you get to ignore.
Your own sales time. If you spend two hours quoting, driving, and following up per signed job, that time has a cost even when nobody invoices you for it.

A CPL figure with none of that in it is a media metric. CAC is a business metric. Agencies quote CPL because it is the number that flatters them, and because it is the only one they can control on their own.

Key Takeaways

CAC is cost per lead divided by your close rate, plus fees and sales time. A $54 lead at a 20% close rate is a $270 customer before you add anything else.
A cheap lead that does not close is worse than an expensive one that does. We have real campaigns sitting at $12.49 and $39.72 per lead, and the expensive one can easily be the better business.
Service-business LTV is mostly repeat and referral, not the first invoice. If you only count job one, you will under-invest in acquisition and lose to whoever counts properly.
The widely quoted 3:1 LTV to CAC benchmark comes from SaaS, not from New Zealand trades. David Skok’s forEntrepreneurs puts the best SaaS businesses above 3, sometimes 7 or 8. Treat it as a sanity check, not a target.
Payback timing matters more than the ratio for a small business, because a great ratio that pays back over four years will still run you out of cash.
You cannot do any of this without close-rate data. If you do not know how many enquiries turned into customers last quarter, that is the first thing to fix.

Three Real Cost Per Lead Figures, and What They Imply

These are cost-per-lead figures from campaigns we have run for New Zealand businesses. The close rates underneath them are illustrative, because close rate belongs to the business, not to the ad account. Swap in your own.

Campaign	Cost per lead	At a 10% close rate	At a 25% close rate
Window cleaning, Google Ads	$12.49	$124.90	$49.96
Taxmates, lead magnet funnel	$15.23	$152.30	$60.92
Ray White Austar, rental appraisals	$54.00	$540.00	$216.00

One clarification worth making, because it is the kind of thing that gets misread in agency decks. The Ray White Austar campaign reports a 19.8% conversion rate. That is the ad-click to enquiry rate inside the campaign, not the rate at which appraisals turn into signed management contracts. Only the client’s own pipeline can tell you that second number. If you see an agency quoting a campaign conversion rate as though it were a close rate, they are either confused or counting on you being confused.

The window cleaning account is the useful comparison here. It held $12.49 per lead across 30 straight months and more than 390 leads. That is a genuinely cheap lead, and for a home-services business with a same-week job value, it works. But a $12.49 lead that goes to voicemail and never gets called back costs exactly the same as one that becomes a customer.

We also run a real estate campaign producing qualified seller leads at $39.72 on Meta. On CPL alone it looks three times worse than the window cleaning account. On the business behind it, one signed listing is worth thousands in commission. The $39.72 lead is the better buy, and it is not close.

That is the whole argument for retiring CPL as your headline metric. It is measured in the wrong unit. More CPL context by industry is in our New Zealand cost per lead benchmarks.

What a Customer Is Actually Worth in a Service Business

Lifetime value in a service business is not the first invoice. It is the first invoice, plus everything that follows from having won that customer.

For most New Zealand service businesses it breaks into three parts:

Repeat work. A window cleaner on a six-monthly cycle is not a $180 customer. Four years of twice-yearly cleans is eight jobs. An accountant who does one annual return picks up GST filings, an entity restructure, and the client’s spouse’s IR3. A property manager who wins one rental appraisal wins a management contract that pays a percentage every week until the landlord sells.

Referral. This is the part nobody puts in the spreadsheet and the part that quietly doubles the answer. If a happy customer sends you one more customer over their lifetime, your effective LTV is roughly double and your effective CAC is roughly halved. You do not have to guess at this. Ask every new enquiry how they found you and record the answer.

Margin, not revenue. Use gross profit, not turnover. A $10,000 job at 20% margin is worth $2,000 to the business. Running LTV on revenue is how businesses talk themselves into acquisition spend that is actually losing money on every sale.

A workable version for most owners looks like this: average gross profit per job, times jobs per year, times the number of years a customer typically stays, plus the gross profit from referred customers. It will not be precise. It will be close enough to make better decisions than a number you invented.

If you do not know how long customers stay, pull the last two years of invoices and look at how many names repeat. That is your data. It exists already.

The Ratio, and Why the Famous One Does Not Quite Fit

The standard benchmark is 3:1. Geckoboard states that “a good benchmark for LTV to CAC ratio is 3:1 or better” and that “if your ratio is 5:1 or higher, you could be growing faster and are likely under-investing in marketing”. The origin of the rule is David Skok’s SaaS metrics work at forEntrepreneurs, which puts it as “the best SaaS businesses have a LTV to CAC ratio that is higher than 3, sometimes as high as 7 or 8”.

Both of those are software benchmarks. Subscription software has near-zero marginal delivery cost, so an extra customer is almost pure margin. A plumber has a van, a tradesperson, parts, and a finite number of hours in a week. The shape of the business is different, so the number should not be imported without thinking about it.

What survives the translation is the direction of travel:

Below 1:1 you are paying more to win customers than they will ever be worth. Stop and fix the offer or the close rate before you fix the ads.
Around 1:1 to 2:1 you are buying revenue, not profit. Common, survivable, and the reason a lot of busy businesses have no money in the bank.
Around 3:1 and up you have an acquisition channel worth feeding. The correct response to finding one is usually to spend more on it, not to congratulate yourself and hold the budget flat.
Very high ratios usually mean you are leaving growth on the table, or that you have not counted all of your costs. Check the second before you celebrate the first.

The capacity constraint is the part the SaaS version of this rule ignores entirely. If your team can take six more jobs a month, a 6:1 ratio does not mean you should scale spend until it hits 3:1. It means you should fill the six and then hire.

Payback Is the Number That Actually Keeps You Solvent

Ratio tells you whether a customer is worth acquiring. Payback tells you whether you can afford to acquire them this month.

Payback period is how long it takes the gross profit from a customer to repay what you spent winning them. forEntrepreneurs notes that “many of the best SaaS businesses are able to recover their CAC in 5-7 months” and that profitability is thin once recovery extends beyond 12 months. For a small New Zealand service business the tolerance is usually tighter again, because there is no venture funding underwriting the gap.

The practical version is blunt. If your customer pays for their own acquisition on the first job, you can scale spend as fast as leads arrive. If it takes three jobs over two years, every new customer is a cash-flow hole you have to fund out of existing work, and the faster you grow the worse the hole gets. Profitable businesses run out of cash this way regularly.

Which is why we would rather see an owner spend on a channel that pays back on job one at a 3:1 ratio than a channel that pays back in year two at 6:1.

Work It Out on Your Own Numbers

You need four things, and you probably have all of them already:

Total acquisition spend last quarter. Ad spend, plus management fees, plus anything else you paid to be found.
Number of new customers in that quarter. Customers, not enquiries.
Average gross profit per job. Revenue minus what it costs you to deliver.
Average jobs per customer per year, and years retained. From your invoices.

Divide one by two and you have CAC. Multiply three by four and you have LTV. Compare them.

Our CAC vs LTV calculator runs that maths and the payback period for you, and the break-even calculator tells you the point at which a campaign starts earning rather than costing. Both take about five minutes with real figures and are more useful than any benchmark table, including ours.

Then do the thing most people skip: work out what CAC you could afford if you were the most aggressive bidder in your market, and check whether your close rate or your retention is what is stopping you from being that.

Frequently Asked Questions

What is a reasonable customer acquisition cost?

There is no universal figure, because a reasonable CAC depends entirely on what a customer is worth to you. A reasonable CAC is any number where lifetime gross profit comfortably exceeds it and the payback period fits your cash flow. In practice, a business with a $400 lifetime gross profit and a $350 CAC has a problem, while a property manager paying $1,000 to win a contract worth $8,000 over its life does not.

How do I calculate the cost of acquiring a customer?

Add up everything you spent to win customers over a period, then divide by the number of new customers you actually signed in that period. Include ad spend, agency or management fees, any software you pay for to run the acquisition, and a realistic value for your own sales time. Use customers, not leads, as the denominator. The most common error is dividing by enquiries, which produces cost per lead and makes acquisition look far cheaper than it is.

What is a good LTV to CAC ratio?

The commonly cited benchmark is 3:1 or better. Geckoboard states that “a good benchmark for LTV to CAC ratio is 3:1 or better”, and David Skok’s forEntrepreneurs puts the best SaaS businesses above 3 and sometimes at 7 or 8. Both benchmarks come from software businesses, so for a New Zealand service business with real delivery costs and capacity limits, treat 3:1 as a sanity check rather than a target, and pay at least as much attention to how quickly the customer pays back.

Is cost per lead the same as CAC?

No. Cost per lead is what you pay for an enquiry, and CAC is what you pay for a paying customer. The difference between them is your close rate, so a $20 lead at a 25% close rate is an $80 customer before fees and sales time. Any report that shows you CPL and stops there is showing you a media metric, not a business one.

If you want a second set of eyes on the numbers behind your own acquisition, that is the first thing we look at when we take on a new account. The ads come after.