How to Slash Customer Acquisition Costs for Your Service Business

by Devon Osborne

Read it to me! Click the video below.

 

Customer acquisition costs (CACs) are the silent killers of profitability in service businesses. Whether you're a roofer, painter, or electrician, you know the pain of shelling out cash for ads, marketing campaigns, and customer outreach—only to wonder why your profits seem razor-thin. It’s a struggle that many contractors face. But what if there were proven methods to reduce CAC while still bringing in high-quality leads? The cost of acquiring new customers can feel like an unavoidable expense, but it doesn't have to be that way. In fact, service businesses that focus on strategic changes can see a dramatic reduction in acquisition costs while still maintaining or even increasing lead flow.

 

You're Probably Spending Too Much—Here's Why

It's easy to think of marketing as a necessary expense—something you just need to pour money into for growth. But here's the reality: most businesses don’t manage their marketing spend efficiently. Worse yet, they don’t track why their customer acquisition costs are so high.

Let’s break down where the real costs come from:

• Unfocused marketing efforts: Trying to be everywhere online without a clear strategy can lead to wasted ad spend. Are you targeting the right audience with your ads? Are you focusing on platforms where your customers hang out?

• Lack of optimization: Running ads without tracking performance metrics is like throwing money into the wind. If you’re not refining your strategy based on data, you’re likely wasting dollars on underperforming campaigns.

• Ignoring existing customers: This might sound counterintuitive, but spending all your budget on new customer acquisition while ignoring the potential of current or past clients is a huge missed opportunity. Existing customers are 50% more likely to try new services and spend 31% more compared to new customers.

An electrician based in Dallas slashed his acquisition costs by 40% simply by reactivating old customers with targeted email campaigns. These were people who had used his service before but had slipped through the cracks. One email reminding them of his services brought them back—and at no extra cost.

 

The Cost of Inaction

Let’s talk numbers. A typical roofer might spend $500–$2,000 per month on ads alone, leading to an average cost of $150–$300 per lead. If 10% of those leads convert, your customer acquisition cost is easily in the hundreds. Now multiply that by the number of leads needed to keep your business growing, and you quickly see e why many contractors find themselves trapped in a high-CAC nightmare.

What happens when customer acquisition cost spirals out of control?

• Eroding Profit Margins: The higher the acquisition cost, the less you take home at the end of the day.
• Unsustainable Growth: If it costs too much to acquire each customer, scaling your business becomes nearly impossible.
• Dependence on Ads: Relying solely on paid ads locks you into a never-ending cycle of spending, making it hard to establish long-term profitability.

The truth is, that without tackling your CAC head-on, your business will struggle to grow sustainably.

 

Reducing Customer Acquisition Costs

Lowering your CAC requires a blend of strategy and smart decision-making. Here’s how you can get your CAC under control:

• Leverage Customer Referrals: Word-of-mouth is still one of the most powerful forms of marketing. Encourage your satisfied customers to refer friends, family, or neighbors. Consider offering incentives like discounts or free services for each successful referral.
• Build Relationships for Repeat Business: Service businesses often focus too much on the next lead instead of nurturing past clients. Repeat customers are cheaper to convert because the relationship is already established. Send periodic check-ins, offer maintenance services, or remind them of seasonal needs to keep them coming back.
• Invest in SEO for Organic Lead Generation: Yes, SEO takes time, but the long-term benefits of ranking on the first page of Google are undeniable. Instead of relying on expensive ads, SEO allows you to generate leads organically. This results in much lower CAC once your site begins ranking for key terms. According to HubSpot, businesses that prioritize blogging and SEO are 13 times more likely to see a positive ROI.
• Utilize Missed Call Text Back: If a potential customer calls your business and doesn't get an answer, that's a missed opportunity. Implementing missed call text back allows you to engage these leads instantly via text, giving you another chance to convert them without spending more money on ads.
• Reactivate Your Existing Database: Past customers and leads can be a goldmine. Rather than constantly chasing new leads, consider running a quarterly database reactivation campaign. Reach out to past customers with limited-time offers, discounts, or seasonal reminders.
• Offer Bundled Services: Packaging services can help increase the value of each customer. For example, an HVAC company could offer a discounted bundle for air conditioning maintenance and duct cleaning, reducing the need for new lead generation.