What is Customer Acquisition Cost (CAC) for SaaS?
In a SaaS company, the Customer Acquisition Costs (CAC) refers to how much your company spent to convince customers to buy your software or service. The total cost refers to the sales and marketing spend including personnel and program cost.
Customer Acquisition Cost (CAC) Calculation
|Customer Acquisition Cost (CAC) =||Total Marketing and Sales Spend in a Period|
|# of New Customers in a Period|
Customer Acquisition Cost Examples
Example 1: Your business sells to consumers and has no direct sales staff.
Here’s how to calculate CAC for a single month:
|No of Marketing Employees||5|
|Cost Per Employee Per Month||$10,000||(Should be “fully loaded” which includes benefits)|
|Personnel||$50,000||(5 employees * $10,000 average per month)|
|CAC||$100||($80,000 total spend / 800 new customers)|
Example 2: You sell to other businesses using a direct sales staff.
Here’s how to calculate CAC for a quarter:
|No of Marketing Employees||3|
|Cost Per Employee Per Quarter||$30,000||(Should be “fully loaded” which includes benefits)|
|No of Sales Employees||5|
|Cost Per Employee Per Quarter||$20,000||(Should be “fully loaded” which includes benefits)|
|Total Commission Payments in Quarter||$85,000||for all sales|
|Marketing Personnel||$90,000||(3 employees X average employee income per quarter)|
|Sales Personnel||$185,000||(5 employees X average employee income per quarter) + commissions|
|Customer Acquisition Cost (CAC)|
|CAC||$8,900||(445,000 total spend / 50 new customers)|
Note: It may seem unfair that CAC is based on marketing and sales spend from the same period as new customers acquired. Many marketing and sales professionals will tell you that investments today reap future benefits, making the CAC for the current period seem high. Our recommendation is that simplicity beats perfection. Pay attention to your quarterly CAC and how it changes from quarter to quarter.
Back to the Churnopedia: SaaS Terms and Metrics