What is CAC: Practical Guide to Calculate & Optimize Acquisition Costs

Customer Acquisition Cost (CAC) in the Software as a Service (SaaS) industry refers to the average amount spent by a business to acquire a new customer, including marketing and sales expenses. CAC plays a crucial role in determining the growth and profitability of a SaaS business, directly impacting cash and EBITDA margins. To reduce CAC, businesses can engage with customer feedback and leverage referral programs. Regular comparison of CAC with other business metrics offers insights into the effectiveness of sales and marketing strategies. Avoid pitfalls in CAC calculation by not underestimating costs or ignoring non-paying customers. A good CAC should be lower than your Customer Lifetime Value (CLV), ideally at a 3:1 ratio. Strategies to improve CAC include allocating resources wisely, refining pricing, targeting accurately, and engaging customers quickly.