How do you calculate the Cost of Customer Acquisition (CAC)?

Calculating CAC requires a combination of marketing and sales expenses and the number of new customers acquired.

Customer Acquisition Cost (CAC) is the total cost that a company incurs in order to acquire a new customer. It is an important metric for SaaS (Software as a Service) companies, as it helps them understand the efficiency of their customer acquisition efforts and the profitability of their business model.

To calculate CAC for a SaaS company, you will need to know the following:

Marketing and sales expenses: This includes all of the expenses that the company incurs in order to generate leads and close new customers, such as advertising, sales salaries, and commissions.
Number of new customers acquired: This is the number of new paying customers that the company was able to acquire in a given time period (e.g. month, quarter, year).

Once you have these numbers, you can use the following formula to calculate CAC:

CAC = Marketing and sales expenses / Number of new customers acquired

For example, if a SaaS company incurs $100,000 in marketing and sales expenses and acquires 100 new customers in a month, their CAC would be:

CAC = $100,000 / 100 = $1,000

This means that it cost the company $1,000 to acquire each new customer.

It's important to note that CAC should be viewed in the context of LTV (Lifetime Value) in order to determine the overall profitability of the business. A high CAC can be justified if it results in a high LTV, as it means that the company is able to generate enough revenue from each customer to offset the acquisition costs.

I hope this helps! If you have any other questions visit us at BIAS