Customer Acquisition Cost (CAC)

CAC is stated as an important metric for SAAS companies and that they should trend down. How does one calculate it? Is it simply sales and marketing exp (SM) for the year divided by the number of customers?

I did it that way for AYX:
12/31/2015 - 1398 customers, $43.3 M so, $0.031M CAC
12/31/2106 - 2328 customers, $57.6 M so, $0.025M CAC
12/31/2017 - 3392 customers, $66.4 M so, $0.020M CAC
12/31/2018 - 4700 customers,$109.7 M so, $0.023M CAC

SM expenses for 2018 estimated based on 9 month SM exp for the year and reported full year rev. Seems like it is starting to go back up now after trending down nicely. I also calculated the rev/customer over this period. It seems like it has been stable at $0.038M/customer from 2015 to 2017 but has gone back up to $0.043M/customer for 2018. So, higher CAC to get larger customers. So not a worrisome trend afterall.


CAC is an interesting metric.

With these software companies I’d be more interested in Dollar Acquisition Cost. Reason being is that some individual customers are worth significantly more than others. A company like Alteryx could acquire one “customer” but get 100 users (and subscription licenses) out of it and a lot more juice out of that berry.

So how much does it cost to acquire one new dollar? Have to figure that one out in most instances I believe.

Off the top of my head I know that EVBG spent $1 for every $1 in new customer revenue. But when that $1 renewed it only cost them $.06. More food for thought. You might spend to acquire them but with these companies it’s the years long relationships that compound into future profit.

That’s why I am ok with these companies spending to acquire a customer. AYX has 90% gross margins. Those dollars gained for future renewals are worth more than 99.9% of the dollars other companies get.




You probably want to divide by the delta


Is it simply sales and marketing exp (SM) for the year divided by the number of customers?

You have to look at the cost to acquire a “new” customer.
This is approximately the change in the number of customers.
But you have to adjust for lost customers as well.

CustNew = CustFinal - CustInit + CustLost

All customers, though, aren’t of equal value
And there isn’t an easy way, usually, to find the number of lost customers, which, by itself would be a good number to know.



These articles help explain why there is value in understanding the role of CAC…



I’m glad you posted this. I was just about to. I have found David Skok’s page to be very useful, especially when I was running a SaaS company.

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These articles help explain why there is value in understanding the role of CAC

If you prefer to watch the video…

reinforced by data from 3000 SaaS businesses

Denny Schlesinger


Thanks to all who responded. I finally got some time to look into this. The corrected CAC for AYX is as follows:

12/31/2016 - $0.062M
12/31/2017 - $0.062M
12/31/2018 - $0.084M

CAC rising does not look good. But I alluded in my earlier post that they maybe getting larger customers. So. if you look at DAC (Darth suggested this) which takes into account effect of larger customers:

DAC = SM rev/(Net new rev added). You want this to trend down. The numbers change as follows:

12/31/2015 - 2.74
12/31/2016 - 1.8
12/31/2017 - 1.45
12/31/2018 - 1.54

This data seems to suggests AYX spent more to get 1$ revenue in 2018 than in 2017. There was clearly efficiency gains from 2015-17. Is AYX having a harder time? This needs watching.

Data from here…