Turn Your CAC into Long Term Growth

Identify which customers are most likely to churn before it happens and maximize the return on your acquisition spend.

Frequently Asked Questions: CAC

How does CAC differ between product-led and sales-led SaaS businesses?

Product-led growth companies typically have lower initial CAC (often 30-50% less) than sales-led businesses since they rely on self-service acquisition. However, the total CAC may even out when accounting for customer success and support resources needed to convert free users to paying customers. Product-led models also tend to have more gradual revenue recognition, affecting the CAC payback period calculation.

Should I include customer success costs in my CAC calculation?

Generally, no. Customer success costs should be categorized as retention expenses rather than acquisition costs. Include only the costs associated with acquiring new customers, not maintaining existing ones. However, if your customer success team plays a significant role in upselling or cross-selling to existing customers, you might consider allocating a portion of these costs to your expansion CAC calculation.

How often should B2B SaaS companies recalculate their CAC?

Most growing B2B SaaS companies should recalculate their CAC quarterly. This frequency provides enough data for meaningful analysis while allowing for timely strategy adjustments. During periods of significant change (new marketing channels, pricing updates, or market shifts), more frequent calculations may be warranted. Mature companies with stable acquisition strategies might shift to semi-annual reviews.

How does a freemium model affect CAC calculations?

Freemium models require more nuanced CAC calculations. You should distinguish between the cost of acquiring free users versus converting them to paid customers. Calculate both metrics: the cost to acquire a free user and the combined cost to acquire and convert a paying customer. This distinction helps optimize both parts of your funnel independently and prevents misleading conclusions about acquisition efficiency.

What's the relationship between CAC and Annual Contract Value (ACV)?

The ratio between CAC and Annual Contract Value (ACV) is a critical efficiency metric for B2B SaaS companies. Industry benchmarks suggest your CAC should generally not exceed your first-year ACV. If you're spending more to acquire a customer than they pay you in the first year, you'll need strong retention and expansion to justify the investment. Enterprise SaaS with ACVs above $100K can often sustain higher CAC ratios due to longer contract terms and higher retention rates.