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Welcome to SaaS Metrics School! I'm Ben Murray, and in this episode, we're breaking down CAC, or Customer Acquisition Costs.

In episode #3, I discuss CAC, or Customer Acquisition Cost. CAC can be gross dollars or a unit cost. Screw up your CAC calculation and it affects CAC Payback Period and your Cost of ARR. CAC is fundamental to your metrics reporting package.

Highlights:

CAC can be dollars or a unit cost
CAC flows to your CAC Payback and Cost of ARR
What’s your prize? Logos, users, brands, etc.
You must allocate gross CAC dollars
Align CAC measurement to your sales cycle
Fully burdened sales and marketing dollars

CAC has two meanings: it's the total expenses to gain a new customer and the unit cost for acquiring one. But here's the kicker: define your goal. Are you after a single customer, a user, or something bigger, like Starbucks and all its coffee shops?

To calculate CAC accurately, split your sales and marketing expenses between new and existing customers. Match your measurement period to your sales cycle. And remember, factor in all expenses – wages, taxes, bonuses, software, and more.

While some businesses adjust CAC as they grow, start with the classical method. Stay tuned for a future episode where we discuss adjusting for new sales reps.

Understanding CAC is crucial for SaaS success. Like, share, and subscribe for more SaaS insights. Thanks for joining us at SaaS Metrics School! 📊📈💼

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