CAC SaaS: What is it? How to calculate it?
If a business doesn’t have any customers, it won’t be able to succeed. Customers are one of the most important roles in the company because they often act as brand ambassadors and keep businesses running. A small or new business can easily stand out from other companies if there is high customer demand.
What is CAC in business? Businesses recognize that customer service is the backbone of their operation. They spend time and money on training to ensure employees are providing high-quality care for customers.
If you find that customer acquisition is a struggle, learning more about the costs of acquiring customers can be helpful. Understanding this topic will help streamline your efforts so that you don’t waste resources trying to get new customers.
What is CAC SaaS?
Customer Acquisition Cost is the resources that a business must allocate in order to acquire an additional customer. CAC SaaS includes every single effort necessary, from advertising and social media campaigns to having enough employees on hand.
When it comes to customer acquisition, business owners should invest in SEO and MQLs. These will help reduce CAC SaaS by drawing organic traffic with unique strategies that make your company stand out.
The more common expenses in sales and marketing are paid advertisement, salaries for the staff on both sides of the company, software licenses to make it easier for employees to work together or market themselves, and events that can be attended by all types of customers. There is also a lot more, including gifts given as well as social media sites created specifically about your business.
The best way to decide which customer acquisition strategy is the right one for your business is by doing some research on what strategies are currently being used in your industry.
How to calculate CAC SaaS?
Conversion rates are very important in the sales process.
One way to do a CAC SaaS calculation is by looking at the three variables that make up it. This method can be helpful for companies who want a more detailed breakdown of their sales process, but may not always get an accurate result.
- CPL (Cost Per Lead) (e.g. marketing costs);
- Touch cost (e.g. sales staff salaries);
- At every stage of the sales process, conversion rates are important.
The cost of acquiring a customer (CAC) is the average price per lead plus any touch costs for that lead multiplied by their conversion rate.
Sales & Marketing expenses
If you want to measure the cost of acquiring a customer, take all your sales and marketing expenses from one month and divide it by how many new customers were acquired in that same time period. For example, if I spend $1,000 on my company’s advertising campaign this month but only acquire 5 new clients then each client would have been worth $200.
The Customer Acquisition Cost (CAC) is the total cost of Sales and Marketing divided by how many new customers were acquired.
CAC SaaS and LTV
If you are not sure what the lifetime value of a customer is, then it can be hard to know how much your CAC SaaS should be. This depends on things like how expensive your product is and so forth; however, generally speaking, the more expensive the product, or service for that matter – in terms of both price point and cost-of-delivery – will have higher CAC SaaS.
When calculating the worth of a customer, it is important to consider their lifetime value. It can be calculated by subtracting acquisition costs from average revenue per user and then dividing that number by the cost of acquiring customers.
The key to any business is balancing CAC SaaS and LTV. There are many different ways to measure these numbers, but the goal of each company should be maximizing lifetime value while minimizing customer acquisition costs. Some SaaS companies have ratios as high as 3 or 7!
Now that you know how to compute customer acquisition costs, it’s time to find a marketing strategy that will entice them. With the number of strategies available today, there is one for every type and budget.
It’s important that your marketing strategies are innovative and in-depth enough for customers to be able to find them.