How to Calculate Customer Acquisition Cost (CAC) for SaaS
Understanding your Customer Acquisition Cost (CAC) is fundamental to building a sustainable SaaS business. It tells you exactly how much you're spending to get a new customer, which is a critical metric for measuring the effectiveness of your marketing and sales efforts.
What is CAC?
Simply put, CAC is the total cost of your sales and marketing efforts needed to acquire a single customer. The formula is straightforward:
CAC = (Total Sales & Marketing Costs) / (Number of New Customers Acquired)Step 1: Tally Your Sales & Marketing Costs
This is where it gets detailed. You need to include all expenses for a specific period (e.g., a quarter or a year). This includes:
- Salaries: The full salaries of your marketing and sales team.
- Ad Spend: All money spent on paid channels like Google Ads, Meta, LinkedIn, etc.
- Tools & Software: Costs for your CRM, marketing automation platforms, analytics tools, etc.
- Content Creation: Any costs associated with creating content (freelancers, designers).
- Overhead: A portion of your office rent and other utilities allocated to the marketing and sales teams.
Step 2: Count Your New Customers
This should be the number of *new* customers acquired during the same period you calculated your costs for. It's crucial to be consistent here. Don't include returning customers unless your model specifically accounts for that.
Step 3: Put It All Together
Let's say in Q1 you spent £10,000 on sales and marketing and acquired 100 new customers. Your CAC would be:
CAC = £10,000 / 100 = £100 per customer
This means you're spending £100 to acquire each new customer. The next step is to compare this to your Customer Lifetime Value (LTV) to ensure you have a profitable business model. A healthy LTV:CAC ratio is often cited as 3:1 or higher.
