3 steps to reduce your SaaS CAC

CAC is a super important concept in SaaS - your growth / economics depend on it. And lowering your costs is crucial - so how do you do it?

Spent some time reading on this today so thought I'd share with the community - have kept it to <250 words

CAC is customer acquisition cost & is measured via a simple formula.

CAC = ($$$ spent in marketing & sales + labor)/number of customers acquired. Over time period “t”.

Your $$ spent in marketing/sales is directly proportional to your CAC. And the number of customers you acquire is inversely proportional to the CAC.

The more customers you acquire at a constant $$$ marketing/sales spend, the lower your CAC gets. So how do you get more customers at the same $$$ spend?

A good rule of thumb is to recover your CAC in 12 months.

Step 1: Quantify your customer persona - Your pricing tier is probably split across 3 personas. And each tier’s CAC is different. Quantify and measure your LTV: CAC ratio for each of the tiers. Aim for a LTV:CAC ratio of 3:1.

Step 2: Identify customer-channel fit - Use data in Step 1 above to identify the relevant distribution channel corresponding to the persona. These can be both sales/marketing channels depending on your customer persona & whether your SaaS is high-touch or low-touch.

Step 3: Optimize your channel - Track, measure and optimize your acquisition channels across your personas. Set up KPIs and revisit them each quarter.

PS: I've made this essay so it fits into a mobile screenshot - I've made this "screenshot essay" here that you can download to your phone while you're doomscrolling lol