Calculate Your SaaS CAC
Your SaaS CAC Result
This is the average cost to acquire one new customer for your SaaS business. A healthy SaaS company typically recovers this cost within 12 months. Compare this with your Customer Lifetime Value (LTV) for a complete picture.
SaaS CAC: Special Considerations
Why SaaS CAC is Different
SaaS businesses have unique characteristics that affect how CAC should be calculated and interpreted:
- Recurring revenue model means costs are amortized over longer customer relationships.
- Higher upfront acquisition costs are often acceptable due to long-term value (LTV).
- Freemium/trial models create multi-stage conversion funnels (only count paid customers).
- Sales cycles can be lengthy, especially for enterprise SaaS, impacting the timing alignment of costs and acquisition.
- MRR and ARR metrics provide additional context for evaluating CAC efficiency (CAC per $1 MRR/ARR).
CAC Payback Period
A critical SaaS metric related to CAC is the payback period—how long it takes to recover your acquisition costs from the revenue generated by that customer:
- Formula: CAC ÷ (Average MRR per Customer × Gross Margin %)
- Healthy SaaS companies typically recover CAC in **12 months or less**.
- Enterprise SaaS may accept longer payback periods (e.g., 18-24 months) due to larger contracts and lower churn.
- SMB-focused SaaS usually needs faster payback (e.g., 6-12 months).
Monitoring both CAC and CAC payback period gives you a more complete picture of acquisition efficiency and unit economics.
SaaS CAC Calculation Formulas
Traditional SaaS CAC Formula
Example:
Sales & Marketing Costs (Quarter): $50,000
New Paying Customers (Quarter): 100
Traditional SaaS CAC = $50,000 / 100 = $500 per customer
This means you're spending $500 on average to acquire each new paying customer.
CAC per $1 of New MRR/ARR (Revenue Efficiency)
Example:
Sales & Marketing Costs (Quarter): $50,000
New MRR Added (Quarter): $25,000
CAC per $1 of New MRR = $50,000 / $25,000 = $2.00
This means you're investing $2 in sales and marketing for every $1 of new monthly recurring revenue added. This metric helps understand the capital efficiency of your growth engine. Compare this over time and against industry benchmarks.
Frequently Asked Questions
Most SaaS companies should calculate their CAC at least quarterly. Larger companies or those with significant marketing spend should consider monthly calculations to identify trends earlier. Always track CAC alongside other key metrics like LTV (Customer Lifetime Value), the CAC:LTV ratio, and the CAC payback period for a complete picture of your acquisition efficiency and unit economics.
No, standard CAC calculations should only include *paying* customers. Count a customer when they convert to a paid plan, not when they sign up for a free trial or freemium plan. However, you should track your trial-to-paid conversion rate separately, as this is a critical SaaS metric impacting your overall acquisition efficiency.
Ideally, include all costs associated with acquiring new customers. This typically covers: marketing program spend (ads, content, SEO), marketing and sales team salaries and bonuses/commissions, relevant software tools (CRM, marketing automation, analytics), agency fees, and any overhead attributable to the sales and marketing functions for the specified period.
Self-serve SaaS models typically have lower CAC because they rely less on expensive sales teams and more on product-led growth, marketing automation, and efficient onboarding. Sales-led SaaS models usually have higher CAC (due to sales commissions, longer sales cycles) but often compensate with higher average contract values (ACV) and potentially lower churn. Each approach requires different CAC benchmarks and optimization strategies.
A commonly cited benchmark for a healthy SaaS business is a CAC:LTV ratio of at least 3:1, meaning the lifetime value of a customer should be at least three times the cost to acquire them. However, this can vary based on growth stage, funding, and business model. Early-stage startups might accept a ratio closer to 1:1 or 2:1 temporarily to gain market share, while mature, efficient SaaS companies often target 4:1 or higher.
Standard CAC calculations focus solely on the cost to acquire *new* customers and the number of *new* customers acquired. Revenue generated from existing customers (expansion MRR/ARR) is critical but typically measured separately via metrics like Net Revenue Retention (NRR). While you might calculate an "Expansion CAC" (cost of sales/marketing efforts for expansion / expansion MRR), it shouldn't be mixed with the primary New Customer CAC.
Optimize Your SaaS Acquisition Strategy
Understanding your CAC is just the beginning. Explore our specialized guides for SaaS businesses to improve customer acquisition efficiency, calculate LTV, and maximize growth.