new customers to determine your cost per customer.   Of course, this is not entirely accurate, but its a pretty good guideline. Many of your customers came as a result of word-of-mouth or referrals. Perhaps some of your old customers purchased your product or service from you as well. These things can incorrectly inflate the cost per new customer.   Lets do a hypothetical calculation for a new customer acquisition cost for a hot tub dealer. Well assume that we sold $1,000,000 worth of spas and our marketing expense was 5% of revenue.   New Customer Acquisition Cost   Total marketing cost from previous year $50,000 Number of spas sold 166 Average cost of new customer acquisition $301   Youve Got to Start Somewhere   Although your new customer acquisition cost may not be entirely correct, at least its a start. By the way, you should start to collect some important information from your customers at the time of the sales. For example, you should be tracking how your customers came to you and what motivated them to buy from you. Calculating the Lifetime Revenue of a Customer   Now that you have a yardstick to use for your new customer acquisition costs, you need to look at your "lifetime revenue of a customer." Before we do that though, you need to answer some basic questions about your business. Supposing you own a hot tub dealership, these are the questions you should ask yourself:   How much is the average hot tub sale?   What is the average chemicals sale?   How often does a customer make a chemical purchase?   What is the average spa cover sale?   How often is the average spa cover sale made over the life of a hot tub?   What is the average parts sale over the life of a spa?   How often does a customer make a parts purchase over the life of the spa?   On the average, how many referrals does one of your customers make that results in a sale?     So lets do a hypothetical calculation with the answers to these questions. To be conservative, this calculation is based on the assumption that a family will only purchase