5. Cost of acquisition
Technical metrics are commonly mentioned for financial products.
Once you understand your overall eCommerce activity and your most sticky sellers, time to dive into your economics.CAC (Cost of Acquisition) is the most common way to estimate how much it costs you to generate a conversion.
What Is the Cost of Acquisition?
The cost of acquisition is the total expense incurred by a business in acquiring a new client or purchasing an asset. An accountant will list a company's cost of acquisition as the total after any discounts are added and any closing costs are deducted. However, any sales tax paid is not included in this line item.
Understanding the Cost of Acquisition
As an accounting term, the cost of acquisition includes all upfront costs incurred when purchasing a business asset such as equipment or inventory. The figure includes the following:
- Purchase price of the item
- Costs to ship it to its point of use
- Costs to install the item
- Costs to get it up and running (in the case of equipment) or ready for sale (in the case of inventory) condition
The business normally adds in other expenses like closing costs, customs and fees, testing, and other miscellaneous expenses when calculating the cost of acquisition. Any discounts are reflected in this line item. However, taxes are not included.