What is your CPA?

September 30, 2014

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CPA isn’t just the title of your accountant, it also means Cost Per Acquisition. CPA is a common term used in online marketing to measure the cost of acquiring a client or customer. Knowing these costs is key to managing your overall operating strategy. As mentioned in past posts, M&A firms are often small businesses and need to adopt the same basic strategies and tactics many other small businesses use to grow into healthy sustainable businesses.

Let’s look at an example for a fictitious small M&A firm:

Annual Marketing Budget (trade shows, PPC advertising, etc)= $30,000

Total Leads Generated Per Year= 60

Total Leads Converted to Signed Engagements= 6

In essence, it costs this firm $30,000 to generate six signed clients over the course of a year. This equates to a $5,000 cost per client acquisition. This information can be helpful in understanding your future budgets or desired future deal flow. In a future year, if the firm wanted to increase deal flow (all other factors constant) they would then expect one new client engagement for every $5,000 annual increase in their budget. As the old adage goes, “You can’t manage what you can’t measure.” In this case, knowing what your true cost to acquire a client is key to understanding the overall implications of deal flow as it relates to your operating budget.

With increasing valuations, it is imperative for dealmakers to take advantage of the burgeoning M&A activity without getting left behind in the equally increasing competitive environment. Having a clear understanding of your firm’s CPA allows executives to measure goals and apply leaner strategies where needed.