Customer Acquisition · Saas

How do you calculate the customer acquisition with your startup?

Anonymous

September 30th, 2016

In the process of figuring out the marketing plan for a SaaS business. To do a good job I need to nail it on the customer acquisition cost. How did you come up with this for your own startup?
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Scott Ling CEO/Founder @InstantAPI - Investor of time and knowledge to BitAngels - Lean/Agile Mentor

September 30th, 2016

CAC is one of the harder metrics to figure out and depends a lot on how you plan your company accounts and business model.

Since you state you are a SaaS play, there are a few things you need to know the most important is the expected LTV (liife time value) of a customer or sale.

Most young startups calculate LTV as 12 or 24 months of subscription revenue per subscriber on the most popular plan they expect to sell. 

You also need to know what you are paying in total to close a sale on average, this is where it gets hard and most people forget to factor things in. (don't be surprised if you end up making your product more expensive.)

Things that add to a CAC are:
  • hourly time spent closing a deal (sales contact, demos, on-boarding by support)
  • cost of marketing/advertising in a month split by customers acquired (most claim no marketing costs  but again there is the time spent marketing/advertising/reviewing results and planning that has a value, even if you only use free tools.)
  • If you sell via channels - CAC can be quite low, but still has the time/costs of on-boarding a channel and supporting them. (only low at volume, very expensive at beginning)
quick note, dont calculate CAC based on your now, but what it should look like with modest to low traction - unless you are a high price SaaS platform 1k+ a month your CAC will high compared to sales costs initially and likely eat all margin.

once you have a CAC per sale, ideally you want to recover that CAC within 50% of the LTV or sooner while still maintaining a good margin from the SaaS sales price - minus (cost of goods and cost of support of platform post on-boarding)


Sorry for rambling nature of reply... from phone and barely awake ;)


Burke Franklin

September 30th, 2016

This may seem too simplistic, but since you will project your marketing costs as well as number of customers... simply add a row to your financial model and divide. And show how CAC drops(?!?) into the future.

We do this in the BizPlanBuilder business plan software excel-based financial model template