Procurement Glossary & Terminologies

Understanding Acquisition Cost

An acquisition cost, also known as the cost of acquisition, is the entire cost that a business records for real estate or equipment on its books after discounting, compensating, paying closing costs, and other essential expenses, but before sales taxes. An acquisition cost could also include the sum required to acquire another business or buy an existing business unit from another organization. An acquisition cost can also refer to the expenses incurred by a company in connection with its efforts to acquire a new customer.

The total cost that a company registers for real estate or equipment on its books, after discounts, compensation, closing costs, and other necessary costs, but before sales taxes, is referred to as the acquisition cost, sometimes known as the cost of acquisition. The amount needed to purchase another company or a current business unit from another organization could also be considered an acquisition cost. The costs incurred by a business in connection with its efforts to attract a new customer can also be referred to as acquisition costs.

Importance of Acquisition Cost

A crucial business statistic that many companies and investors consider is acquisition cost. Failing to comprehend their acquisition cost entirely leads to the demise of many businesses.

1. Enhancing return on investment as one step

Analyzing marketing return on investment requires a thorough understanding of the cost of acquiring new clients.

2. Increasing revenue and profit margin

A company can adequately examine the value of each customer and increase its profit margins by comprehending its acquisition cost.