“How Much Should I Spend on Ads?”
“How Do I Establish a Marketing Budget?”

These are questions we’re often asked in the initial phase of a sales call. The answer is straightforward yet complex, and begins with “Well, it depends…” Your client acquisition cost depends on many aspects such as your business goals, your conversion rate and your industry’s level of competition. We broke it down with our Cost Acquisition Calculator, which we affectionately call the CAC.

Benefits of Using the Client Cost Acquisition Calculation

Without knowing your client acquisition cost, how will you determine your ROI? Understanding your ROI is an important factor in the financial success of your business. Using the calculator helps prevent the misallocation of resources by planning out costs and expenses in advance, maximizing the impact of your expenses per client. Reporting exact numbers of your acquisition cost helps you justify your marketing budget to upper management and to the partners in your law firm.

Client Acquisition Cost Calculator

Determine the Number of Leads Needed to Reach Revenue Goals

We start by establishing the value of a client in their first year: most companies know their rough average amount — it doesn’t need to be specific. For example, for an average case, a client will bring $50k in revenue to the firm. The next step is determining your annual revenue goal. In this example, we kept it basic by targeting an annual revenue goal of $500k.

To reach that goal you will need to acquire 10 new clients. Most firms also know how many leads are needed to acquire a new client. For example, for every five callers, you know you will convert at least one into a new client. To reach your goal of 10 new clients, you will need to generate 50 leads.

Marketing Budget Calculator

The next phase is where we really start digging into the actual budget. The minimum you should allocate on your marketing expenses is 10% of your annual budget. However, the CMO Survey suggests an average allocation of 15%.

As you allocate your budget, it’s crucial to understand the digital landscape of your practice areas. Many legal search terms are highly competitive, which means outranking your competitors is no easy task.  This high competitiveness also means that effective cost-per-click (CPC) advertising, such as Google AdWords, carries a higher price tag. Setting the calculator’s scale on a high competition level allows you to account for this, and gives us a newly estimated budget of $98,550.

The Cost to Acquire a New Client

The Forrester CMO survey suggests distributing your total budget with a 70-30 ratio, allocating 70% to offline expenses (Billboards, print, radio, etc.) and the remaining 30% (of our newly estimated budget of $98,550) to online expenses. This roughly gives us $30k for the online advertising campaign.

Once we have these facts and figures determined we then discover, via the automatic calculator that:

  1. The cost per lead is $2,571
  2. The cost to acquire a new customer is $12,855
  3. The acquisition to cost ratio is 14.5%

Give the Cost Calculator a Try

Experiment with your own figures here. Use this tool to your advantage when presenting your marketing budget to your firm.

Unsure How to Use the Calculator?

We’d love to walk you through the process. Use our online scheduler to pick the best time for you to speak with Brent, our CSO. He can help you establish your budget for presenting lead generation ideas to your firm.