SaaS CAC (Customer Acquisition Cost) Guide: Running a Health Check on Your SaaS Business
In today’s guide, we will tell you CAC definition, show you how to calculate it correctly, prove to you why it’s a must-know metric, and share some actionable ways to reduce your costs of acquiring new paying users.
What is CAC in SaaS (and is it equal to CPA)?

How to calculate SaaS customer acquisition cost? (formula + example)
CAC = Total Cost of Sales and Marketing/ # of Customers Acquired in a Given Period
What is included in customer acquisition costs?
You have 5 customers with several monthly subscription plans.
- Salaries of your marketing and sales team members,
- Benefits & rewards your Smarketing team members enjoy,
- The money you spend on PPC ads, affiliate/influencer marketing campaigns, referral discounts,
- Monthly payments for online tools your team uses (KR, PPC, email marketing or other tools),
- Customer service team expenses also may be included in your CAC if they actively participate in answering queries from potential customers (e.g. via chat or email),
- Others costs you pay for marketing or sales consultation, design & development activities to make your customer acquisition campaigns more productive.
Why measuring CAC is important for your SaaS business growth?

You understand how much you spend and whether to optimize your investments
Maybe you support the idea that good marketing is never redundant but won’t you agree that analysis and optimized marketing spend is much more preferable? When you know your SaaS CAC, you can compare your results with your competitors (if you are able) and see, perhaps you are too lucky or too unfortunate (and need to read our next section more attentively).
You analyze the profitability of each marketing channel separately
Say your customers who convert from organic search cost incomparably less than customers from PPC. Why not reinforce your SEO activities and cut down your PPC expenses if you have reliable data to rely on? There are no magical or futile strategies.
Every business individually discovers which digital marketing approach drives the most revenue. If you can acquire the same number of customers with lower investments, you reach higher ROI and increase your net profit.
You learn your LTV:CAC ratio and check your SaaS healt
One more SaaS metric enters the game – LTV. Maybe you will say – marketing and growth don’t follow any general rules. But 3:1 LTV:CAC ratio has been recognized as the minimum any SaaS business should strive for.
A high ratio is typical for fast-growing successful SaaS businesses and also companies who save money on their Smarketing expenses. Thus, they acquire a few customers with little expenses. Make sure your SaaS will fall under the first category should one day you exceed 3:1 ratio.
Your investors would like to know how scalable your SaaS is
Your SaaS startup may offer a perfect solution for the X group of people and work with a wonderful team. But do the members of that X group convert slowly and require plenty of dollars? Your investors don’t want your CAC to be higher than or equal to your pricing (nor you want). And you should first know how much your SaaS CAC is to think about reducing it or being happy with your current situation.
How to reduce and optimize your SaaS customer acquisition cost?
Encourage your customers with a referral program
The most common way to build your referral program is to offer 10% to your customer once his friend subscribes to one of your plans. If your customers pay you $39 per month and refer to 5 friends, they get a 50% discount and you get 5 paying users. You invest $19.5 and your ROI $195. Anything better?
Optimize your pricing page (including pricing plans)
That is immensely important. If only you knew how psychological approach can increase the conversion rate of your pricing page.
If only you knew how many visitors will leave your pricing page because of poor design, unintuitive interface, and absence of clear info about your software features.
Would you subscribe to software with the pricing page below that neither targets buyer personas nor even mentions features available in every plan?

Utilize free marketing channels for promotion opportunities
Users ask for software recommendations on Quora and visit review sites like Capterra to find the online tools they need. For example, Capterra is designed right for the SaaS industry so people quickly find the software they are looking for. All you need is to send a request to Capterra and create a compelling profile on their website.
Quora doesn’t welcome too many links to your website and self-advertisement but if someone directly asks for the software name, you first help with your answer, then advertise.
Minimize manual processes, invest in marketing automation
We mentioned above that marketing tools are part of your overall Smarketing costs. But they more give than take, no matter whether you go for PPC or inbound marketing. If you want accuracy in your research and optimization efforts, a precise marketing tool will become a lifebuoy for your SaaS.
Wrong statistics are worse than the lack of it. If you zero in on SEO content production, you need a paid tool that will give more professional and accurate suggestions regarding keywords. If you focus on email marketing and want to educate your customers before converting them, you need to send massive emails. And hopefully, not manually.
Reduce investments on PPC and leverage inbound marketing
We don’t claim PPC is a weaker strategy or inbound methodology is the only force we trust in. We simply look at the reality. The visibility of your PPC ads is temporary: once you stop your ads, you will not appear on SERP anymore (if you don’t do any SEO). SEO content serves you even when you don’t have money for paid promotion.
Which marketing channel is the most cost-effective for you? Which points in our guide are you going to use in your marketing activities that are meant to optimize your CAC?