🎙️ Hey there, SaaSpreneurs!🎙️

Welcome back to another episode of SaaS Metrics School! 🎉 I'm your host Ben Murray, and in today's episode, we're diving into the juicy topic of CAC (Customer Acquisition Costs).

If you're ready to up your SaaS game and learn how to measure the expenses associated with acquiring new customers, then buckle up, and let's get started!💪

You can also listen to today’s episode here.

📓Key Concepts to Learn💡

1. CAC Defined 📊: CAC, short for Customer Acquisition Costs, refers to the total expenses incurred in acquiring a new customer. These expenses typically include marketing and sales costs, but it's important to differentiate between gross expenses and unit costs when calculating CAC.

2. Defining Your Prize💸: When determining your CAC, ask yourself, "What are you after?" Are you targeting individual customers, users, or entities, or looking to acquire a whole new customer base? It's crucial to align your CAC calculations with the correct unit measurement. Otherwise, your metrics will be completely skewed.

3. Allocating Sales and Marketing Expenses 📉: To calculate CAC accurately, take into account your sales and marketing expenses and accurately allocate them between acquiring new customers and expanding your existing customer base. Don't overlook the impact this has on downstream metrics such as CAC payback, cost of ARR, and overall sales and marketing efficiency.

4. Sales Cycle Alignment 〽️: Matching the measurement period of your sales and marketing expenses with your sales cycle is crucial for accurate CAC determination. Remember, a short sales cycle requires shorter measurement periods, whereas a longer cycle needs a more prolonged period of analysis.

5. Fully Burdened Expenses 💵: When calculating CAC, consider all expenses related to sales and marketing. This includes wages, taxes, benefits, commissions, bonuses, travel expenses, software subscriptions, advertising costs, and more. Leave no stone unturned when it comes to fully burdened expenses. Don’t cheat here!

And there you have it! A brief overview of Customer Acquisition Costs and why they play a vital role in the success of your SaaS business. By understanding and effectively managing your CAC, you can make more informed decisions about your marketing and sales strategies.

If you found this episode helpful, make sure to tune in to future episodes of SaaS Metric School to broaden your knowledge of essential SaaS metrics and finance topics.

Got any burning questions or specific metrics you'd like us to cover?

Drop us a line, and we'll do our best to address them in upcoming episodes.

Until next time, keep hustling and measuring those metrics!

Best regards,

Ben Murray
Host of SaaS Metric School

📝 Episode Recap 🎧

In this episode, we touched upon adjusted CACs, where some companies may consider excluding the ramp-up costs of new sales reps. While it's good to explore such adjustments, sticking to the classical CAC calculation is our go-to recommendation. We can always dive deeper into adjusting the metrics in a future episode.

To recap, CAC has two meanings - gross expenses and unit cost. Identifying your prize, allocating expenses correctly, and considering the sales cycle are essential for accurate CAC calculations.

And let's not forget the importance of fully burdened sales and marketing expenses.