How to calculate the true cost of winning a new project for your architecture firm

Search “how to calculate customer acquisition cost” and you’ll find dozens of guides. They’ll all give you the same formula: total sales and marketing spend divided by number of new customers. The important question is whether your inputs include the full cost of winning the work.

The standard formula works for a services firm too, provided its inputs include all the work involved in winning clients.

This guide walks through exactly how to calculate your real CAC as an architecture practice, step by step, with the inputs that actually apply to your business.

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How to apply the standard CAC formula to architecture firms

The standard CAC formula is total acquisition sales and marketing costs divided by new customers acquired. It can include salaries and other acquisition labour in any sector. For services firms, the challenge is identifying time spent on proposals and relationships as well as direct marketing spend.

Three things make architecture firm CAC fundamentally different.

First, founder-led sales. Most architecture firms under $5M don’t have a dedicated business development team. The principal or practice director is the rainmaker. Their time (on client meetings, tender and expression of interest responses, interviews, presentations, networking at industry events) is the single largest acquisition cost. But it never shows up as “sales spend” in the P&L because the founder doesn’t invoice themselves.

Second, long relationship-based sales cycles. A conversation with a developer at a civic event might lead to a tender invitation six months later. A past client might call about a new project two years after the last one wrapped. There’s no clean “campaign spend” to attribute. The costs are diffused across months of relationship building, follow-ups, and conversations that don’t have a line item.

Third, team involvement in pitches. Architects develop schematic concepts for proposals. Project architects prepare fee proposals and project approach narratives. Junior staff produce presentation drawings, renderings, and portfolio materials. These are billable people doing unbillable work, a real acquisition cost. Standard CAC can include this labour; the practical task is to allocate it consistently. Include founder and team acquisition time, avoid counting salaries twice, and align the cost period with the clients or projects won.

A fourth difference matters even more: margins.

Use gross profit consistently when comparing lifetime value with acquisition cost. Revenue and gross profit differ in software as well as services. A client paying $1,000 a month for three years generates $36,000 lifetime revenue. At an illustrative 80% gross margin, that is $28,800 lifetime gross profit, before acquisition costs, overhead and tax. Apply the actual gross margin rather than assuming almost all revenue is profit.

For an architecture example, On a good day a practice keeps something like 50-60% of fee revenue after paying the people and costs to deliver the work (known as gross profit margin, or GPM). That means 40-50 cents of every fee dollar goes straight to delivery costs: architect salaries, subconsultant fees (structural, building services, landscape, civil), drafting and BIM software, and project-specific expenses like printing, models, and travel. A project with $300,000 in fees generates $150,000-$180,000 in gross profit. That’s the number to measure acquisition cost against, not the fee revenue.

A benchmark is useful only when its definitions match yours. On a gross-profit basis, a 3:1 LTV:CAC ratio means acquisition absorbs one-third of lifetime gross profit in any sector. We use 5:1 as a planning rule of thumb, not an industry requirement or a guarantee of healthy economics. Also consider payback time, retention uncertainty, overhead and cash needs.

The architecture firm CAC formula

Here’s the formula, built for how architecture firms actually win work:

Three cost categories. One number. Note the denominator: projects won, including repeat commissions from past clients. If you want customer acquisition cost in the strict sense, divide only the cost of pursuing new clients by the number of new clients won. Repeat clients usually cost far less to win again, which is why their value shows up in lifetime value, covered below. Let’s walk through each cost category.

Principal/director business development time. In our experience this is often 50-70% of total acquisition cost for firms under $5M. It includes every hour the principal spends on activities that exist to win new work: client meetings, tender and EOI strategy, shortlist interviews, networking at Australian Institute of Architects events and developer functions, presentations to selection committees, relationship maintenance with past clients and referral sources.

Direct sales and marketing spend. Everything you pay for that exists to bring in new business. Website hosting and maintenance, CRM or pursuit tracking tools, industry association memberships, conference attendance, award submissions, portfolio and qualifications package production, PR or communications support, and any content creation that positions the firm. If you hire a marketing coordinator or outsource proposal graphics, those costs go here.

Team time on pursuits. Billable team members doing unbillable work. Architects developing schematic concepts for proposals. Project architects writing project approach narratives and preparing fee proposals. Junior staff producing presentation boards, renderings, and portfolio updates. Calculate their cost the same way you’d calculate founder time: hourly rate times hours spent.

Step-by-step calculation

Here’s the full walkthrough using a $2M architecture practice as the example. Follow along with your own numbers.

Step 1: Calculate your principal business development cost.

Find your hourly rate. Total annual cost to the firm (salary or drawings, superannuation and other on-costs) divided by the hours you actually work in a year. This example uses 1,920 (48 weeks of 40 hours, allowing for annual leave and public holidays); a 38-hour week over the same 48 weeks is 1,824 hours.

Estimate your weekly BD hours. Be honest. Include client development meetings, tender reviews, shortlist interview prep, Institute chapter events, developer networking, proposal strategy sessions, past-client relationship calls, and community involvement that positions the firm. If you’re not sure, track it for one week. Most principals land between 10-20 hours per week and are surprised it’s that high.

Multiply. Weekly hours x hourly rate x 48 working weeks (the same 48 weeks used for the hourly rate) = annual principal business development cost.

Example: $200K total cost / 1,920 = $104.17/hour. 15 hours/week x $104.17 x 48 weeks = $75,000/year in principal time on business development.

That’s $75K in acquisition cost before a single dollar of marketing spend. This is the number that shocks most firm principals. You can’t see it on your P&L, but it’s real: every hour you spend pursuing work is an hour you’re not spending on active projects, and your compensation doesn’t change based on how you spend your time.

Step 2: Add your direct sales and marketing spend.

Pull these from your P&L or accounting software for the same 12-month period:

• Paid advertising: Google Ads, LinkedIn Ads, Meta/Facebook, PPC, sponsored posts, any paid media
• Tools and subscriptions: CRM (HubSpot, Salesforce, etc.), proposal software, email marketing platforms, SEO tools, LinkedIn Premium
• Content and creative: Project photography, writers, video production, case study design: anything produced to attract or convert prospects
• Website: Hosting, maintenance, redesigns done to support lead generation
• Events: Conference tickets, sponsorships, speaking engagement travel, networking event costs, industry association memberships, award entries
• Collateral: Capability statements, pre-qualification packages, portfolio materials created to win new work

Example: $25,000/year across all categories.

Most firms undercount this because the expenses are scattered across different P&L categories. A $500/month CRM subscription doesn’t feel like “acquisition spend” until you realise it exists entirely to manage your pipeline.

Step 3: Estimate team time on pitches and proposals.

Identify everyone beyond the principal who participates in business development. Architects developing concept sketches for a pitch or design competition. Project architects scoping and pricing fee proposals. Graduates producing presentation drawings, renders and portfolio updates.

Calculate their hourly cost the same way: salary plus super and on-costs divided by the same 1,920 hours. Estimate monthly hours each person spends on new business activities. Multiply by 12.

Example: Three team members averaging 6 hours/month each on business development. Their blended hourly cost is $55/hour. That’s 216 hours a year x $55 = $11,880/year.

This number is often smaller than principal time, but it adds up, especially if your firm does detailed custom proposals for every pursuit. If your team spends 80 hours preparing for a design competition that doesn’t result in a commission, that’s $4,400 in delivery capacity you didn’t bill for.

Step 4: Add it all up and divide.

The architecture firm acquisition cost worksheet

An illustrative $2M practice: follow along with your own numbers

Step 1: Principal BD time 15 hrs/week x $104.17/hr x 48 weeks

$75,000

+

Step 2: Direct BD and marketing spend Institute membership, awards, website, portfolio, tools

$25,000

+

Step 3: Team pursuit time 3 team members x 6 hrs/mo x $55/hr x 12 months

$11,880

Total annual acquisition cost

$111,880

Divided by 8 new projects won that year

Your real acquisition cost per project

$13,985

Principal time = 67% of the total. The cost your P&L never shows you.

Far from the “basically zero” many principals assume. In this example principal time is roughly two-thirds of the total. That is why labour allocation matters. If three of the eight projects were repeat commissions from past clients that took little pursuit effort, the cost of winning each genuinely new client is higher again, which is why it pays to track the two separately.

Now make it useful: CAC by channel

Your overall CAC is the starting point. The real value comes from breaking it down by how clients actually found you.

For each channel, estimate the costs specific to that channel and divide by clients won through it:

Referrals. Founder time on referral conversations and relationship maintenance, divided by clients won via referral. This is usually your lowest-cost channel, but it’s not zero. If you spent 5 hours of principal time per referral client on calls, meetings, and proposals, that’s roughly $520 per client in principal time alone. Add a portion of your CRM and tools cost.

Inbound (content and SEO). Content creation costs plus SEO tools plus a share of website spend, divided by clients won through inbound. Higher upfront investment, but the cost per client typically decreases over time as content compounds.

Tenders and outbound (ads and direct approaches). Ad spend plus outreach tools plus time on outbound activities, divided by clients won through outbound. Usually the highest cost per client, but potentially the most scalable and the least dependent on the founder’s personal network.

Events and networking. Conference costs plus sponsorships plus founder time at events, divided by clients won from those events. Often the hardest channel to attribute, but worth estimating.

When you see CAC by channel, you can answer a question most founders guess at: where should I invest my next growth dollar? The answer isn’t always “the lowest CAC channel.” It’s the channel with the best LTV:CAC ratio, because some channels produce clients who stay longer, expand scope, and generate more lifetime gross profit than others.

What your CAC number actually means

Your CAC alone doesn’t tell you if it’s good or bad. You need to compare it to what each client is worth, and for architecture firms that means calculating the value with gross profit, not fee revenue.

Architecture firm LTV formula: Average fees per project x average number of projects per client x GPM = lifetime value (LTV).

A client who commissions two projects averaging $250K in fees, at 55% GPM: $250,000 x 2 x 0.55 = $275,000 LTV. Match the denominator to both projects: if each costs $13,985 to win, total acquisition cost is $27,970 and the ratio is $275,000 ÷ $27,970 = about 9.8:1. For a true client-lifetime calculation, use measured new-client acquisition cost plus relevant repeat-selling costs.

A one-off project at $150K in fees at 40% GPM: $150,000 x 1 x 0.40 = $60,000 LTV. Against $13,985, that’s about 4.3:1. Workable, but not a lot of room for error, and it highlights why repeat client relationships are so valuable to the economics of a practice.

At 55% GPM

$165,000 LTV

$300K in fees across two projects x 55%

Assuming two projects at $13,985 each: about 5.9:1

At 35% GPM

$105,000 LTV

$300K in fees across two projects x 35%

Assuming two projects at $13,985 each: about 3.8:1

This is why GPM matters so much. Improving your delivery margins doesn’t just put more money in your pocket month to month; it fundamentally improves your growth economics by increasing LTV on every client you’ve already won.

Here are the working ranges we use as a starting point at each stage:

Firm size	Acquisition cost range	LTV range	Target LTV:CAC
$500K-$1.5M	$1K-$5K	$35K-$100K	5:1+
$1.5M-$5M	$5K-$15K	$100K-$400K	5:1+
$5M-$10M	$10K-$25K	$250K-$750K+	5:1+

These are rules of thumb drawn from our work with professional services firms, not published industry benchmarks. Your numbers will vary based on project type, fee model, and client type. Use them as directional guideposts, not rigid targets.

What your LTV:CAC ratio is telling you

For architecture firms, LTV = gross profit, not revenue. Match the benchmark definition.

• <3:1 Danger

  Growth is too expensive. Your acquisition cost is eating too much of the gross profit from each client. Reduce CAC or improve retention and margins before scaling.

• 3-5:1 Tight

  Viable but not much room for error. Focus on increasing client lifespan and improving GPM to push the ratio higher before investing heavily in acquisition.

• 5-8:1 Healthy

  Strong growth economics. Your acquisition costs are well-supported by client value. Safe to invest in scaling acquisition channels.

• 8:1+ Strong

  Excellent economics. You may be underinvesting in growth: consider increasing acquisition spend to capture more market share while the ratio supports it.

Below 3:1 means growth is too expensive: you need to either reduce CAC or improve retention and margins to push LTV up. Between 3:1 and 5:1 is workable but tight. Above 5:1 means your growth economics are healthy and you can invest more confidently in scaling. To see where you sit, get your free financial health check.

What to do Monday morning

Track your time for one week. Keep a rough log on your phone. How many hours did you spend on activities that exist solely to win new business? Multiply by your hourly rate. That’s your weekly principal contribution to acquisition cost, and it’s probably the number that surprises you most.

Pull your P&L and tag every sales and marketing expense. CRM subscriptions, media spend, event tickets, content costs, proposal software. Add it up for the last 12 months. Most founders haven’t seen this number as a single total before.

Count the projects you won in the past 12 months, and mark which came from new clients. Divide your total acquisition costs by projects won. Write it down. That’s your acquisition cost per project, and now every growth decision you make has a baseline to measure against.

The firms that grow efficiently aren’t the ones that spend the most on acquisition. They’re the ones that know exactly what they spend, know what each client is worth, and can see whether the ratio between those two numbers supports the growth they’re planning.

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The reason most architecture firm principals have never calculated their CAC isn’t that the maths is hard. It’s that nobody has shown them the version of the maths that applies to their business. Start with the standard formula and allocate the costs of your own acquisition process.

Your firm wins projects through relationships, referrals, proposals, and founder hustle. The costs are real; they just don’t look like a SaaS acquisition budget. And because your margins are tighter, every dollar of CAC matters more. Once you see the numbers clearly, every growth decision gets sharper.

Frequently asked questions

What costs should I include in my architecture firm’s CAC?

Three categories: principal and director time on business development (meetings, fee proposals, tenders, networking, interviews), direct sales and marketing spend (advertising, CRM, tools, events, awards, content, website), and team time on pitches and proposals (architects, project leads and graduates doing unbillable business development work). The test for whether something belongs: would this cost exist if you weren’t trying to win new business? If no, it’s an acquisition cost. Delivery costs like client onboarding belong in your GPM calculation, not your CAC.

Should I include founder time in CAC?

Yes. In our experience it’s usually the largest component, often 50-70% of total acquisition cost for firms under $5M. Calculate your hourly rate (total cost to the firm / the hours you actually work, about 1,920), estimate weekly hours on business development, and multiply across the same 48 working weeks. A principal costing $200K a year who spends 15 hours per week on business development is contributing roughly $75K per year in acquisition cost. Excluding this makes your CAC look artificially low and leads to underpricing and growth decisions that don’t reflect reality.

What is a good CAC for my size of architecture firm?

The working ranges we use vary by size: $1K-$5K for firms at $500K-$1.5M revenue, $5K-$15K for $1.5M-$5M, and $10K-$25K for $5M-$10M. They are rules of thumb, not published benchmarks, and the number by itself doesn’t tell the full story. What matters is your LTV:CAC ratio, and for architecture firms LTV must be calculated using gross profit (revenue x GPM), not raw revenue, because delivery costs typically take 40-50% of fee revenue. Target an LTV:CAC ratio of 5:1 or higher. Get your free financial health check to see where your practice sits.

How often should I calculate CAC?

At minimum, quarterly. But the most useful habit is tracking principal business development time weekly, even rough estimates in a note on your phone. Weekly time tracking gives you real-time visibility into your biggest cost category. Then quarterly, pull your full P&L, add direct spend and team pitch time, divide by projects won (and new clients won), and update the number. Over time you’ll see trends: is CAC rising or falling? Which channels are getting more or less efficient? These trends matter more than any single calculation.