What it means
Add up everything you spent on marketing in a period, including the tools and the person doing it, then divide by the number of new paying customers that period produced. Unlike cost per lead, this one only counts people who actually paid you.
Why it matters to a small business
It is the number that decides whether growth is worth having. A business can be busier every month and poorer every month at the same time, and this is the figure that shows it. Once you know it, the question stops being how much you can afford to spend and becomes how much you can afford to spend to win one customer, which is a far easier question to answer.
In a month you spend £600 on ads and £150 on the tools and listings that support them, and win 10 new regulars.
£750 divided by 10 customers
£75 to win a customer. Now compare that with what a customer is actually worth to you over time.
The bit people get wrong
Leaving your own hours out flatters it badly. If you spend two evenings a week on this, that time is a real cost, and a business that ignores it can convince itself it is acquiring customers for almost nothing right up until the owner burns out and the acquisition stops.