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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.

What Is Customer Acquisition Cost (CAC)?

Customer Acquisition Cost (CAC) is the total cost a company incurs to acquire one new paying customer, calculated by dividing total marketing and sales expenses by the number of new customers acquired in the same period. For SaaS companies, CAC is a key metric for measuring the efficiency of customer acquisition and the overall profitability of the business model.


 

How Do You Calculate CAC for a SaaS Company?

To calculate CAC for a SaaS company, divide total marketing and sales expenses by the number of new customers acquired in the same period. You will need the following two inputs:

 

  1. 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.

  2. 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).


CAC Formula

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

CAC Calculation Example

If a SaaS company incurs $100,000 in marketing and sales expenses and acquires 100 new customers in a month, the CAC is:

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

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

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.

 

 

How Does CAC Relate to LTV?

CAC should always be viewed alongside LTV (Lifetime Value) to determine overall business profitability. A high CAC is justified when it is paired with a high LTV, because the revenue generated from each customer over their lifetime offsets the acquisition cost.

 

I hope this helps! For further guidance on optimising your CAC and building a scalable revenue engine, explore more resources at BIAS Digital.