Customer Acquisition Cost (CAC)

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) =Total Marketing and Sales Spend in a Period
# of New Customers in a Period

Example 1: Your business sells to consumers and has no direct sales staff. Here’s how to calculate CAC for a single month:

Monthly ItemsNotes
No of Marketing Employees5
Cost Per Employee Per Month$10,000(Should be “fully loaded” which includes benefits)
Program Spend
Agencies$15,000
SEM Spend$10,000
Trade Show$5,000
Costs
Personnel$50,000(5 employees * $10,000 average per month)
External Agencies$15,000
Program Spend$15,000
TOTAL COST$80,000
Customer Acquisition Cost (CAC)
New Customers800
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:
Quarterly ItemsNotes
No of Marketing Employees3
Cost Per Employee Per Quarter$30,000(Should be “fully loaded” which includes benefits)
No of Sales Employees5
Cost Per Employee Per Quarter$20,000(Should be “fully loaded” which includes benefits)
Total Commission Payments in Quarter$85,000for all sales
Program Spend
Agencies$60,000
SEM Spend$100,000
Trade Show$10,000
Costs
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
External Agencies$60,000
Program Spend$110,000
TOTAL COST$445,000
Customer Acquisition Cost (CAC)
New Customers50
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.