Mastering CAC: How to Drive Profitable Growth and Boost the Company Valuation in SaaS

In the fast-paced world of SaaS, customer acquisition is the lifeblood of growth. But how much are you really spending to win each new customer? Understanding your Customer Acquisition Cost (CAC) is the key to unlocking sustainable growth and long-term profitability. Without a firm grip on this vital metric, you might be unknowingly overspending, limiting your potential to scale.

This Scalex Growth Partners guide breaks down the complexities of CAC, offering actionable insights that will help you optimize your acquisition strategy, improve your bottom line, and boost your company's valuation. Whether you're a startup looking for traction or a scaling SaaS business, mastering CAC is crucial to driving success. Ready to take control of your growth engine? Let’s dive in.

Guide Index

1. Introduction to CAC
2. What Should be Included in CAC?
3. Tips for Allocating Sales & Marketing Salaries for CAC
4. Handling Marketing Overhead in CAC
5. CAC, the Rule of 40, and Company Valuation
6. How to Improve CAC and Boost Valuation
7. Benchmarks & Best Practice CAC Numbers
8. Final Thoughts on CAC & Growth
9. Contact Scalex for CAC Optimization and Valuation Growth

1. Introduction to CAC

Customer Acquisition Cost (CAC) is one of the most important metrics for any growing SaaS business. It tells you how much it costs to acquire each new customer by dividing the total sales and marketing expenses by the number of new customers acquired in a given period.

Formula:

CAC = (Total Sales&Marketing Expenses)/(Number of New Customers Acquired)

Where:

Total Sales & Marketing Expenses includes all costs related to acquiring new customers, such as marketing spend, sales team salaries, commissions, bonuses, and any tools/software used for acquisition.

Number of New Customers Acquired is the total number of new paying customers gained during the same period.

2. What Should be Included in CAC?

CAC should only include costs directly related to acquiring new customers, such as:

Marketing spend (ads, campaigns, content creation)

Sales team compensation (salaries, commissions, bonuses)

Sales tools and software (CRMs, sales enablement platforms)

Any other costs directly related to new customer acquisition

Important Note:

Upsell or expansion efforts for existing customers are excluded from CAC. These fall under retention and customer success metrics like Net Revenue Retention (NRR).

3. Tips for Allocating Sales & Marketing Salaries for CAC

To calculate CAC accurately, it's crucial to properly allocate the salaries and overhead costs for the teams involved in customer acquisition. However, sales and marketing teams often work on a variety of tasks—some related to new acquisitions, and others related to customer retention or brand building. Here’s how to handle these allocations effectively:

3.1 Sales Team Salary Allocation:

Since CAC focuses on new customer acquisition, you should only allocate the portion of sales team salaries that directly relates to new sales efforts. Here’s a simple approach to break this down:

Estimate Time Spent on New Customer Acquisition: Have your sales team estimate how much of their time is spent on acquiring new customers versus managing or upselling to existing ones. For example, if a sales team member spends 70% of their time on new customer acquisition, allocate 70% of their salary to CAC.

Example:

Salesperson salary: 600,000 SEK/year

Time spent on new acquisitions: 70%

Salary portion included in CAC: 600,000×0.70=420,000?SEK

3.2 Marketing Team Salary Allocation:

Marketing teams often have a broader focus that includes brand awareness, events, and content creation for general marketing purposes. To avoid overloading your CAC with indirect marketing costs, only include the portion of marketing efforts dedicated to acquisition-specific activities:

Performance Marketing: Campaigns that are directly linked to driving new leads and customer acquisition (e.g., PPC, SEO, social media ads) should be included in CAC.

Brand Awareness & General Marketing: Salaries and costs for brand-building efforts, such as content marketing, general events, and public relations, should be excluded from CAC because they don’t directly contribute to immediate customer acquisition.

Example Allocation:

Marketing director salary: 720,000 SEK/year

Time spent on acquisition-related campaigns: 60%

Salary portion included in CAC: 720,000×0.60=432,000?SEK

3.3 Handling Generic Marketing Costs:

Some marketing expenses—such as brand awareness campaigns, general events, and sponsorships—are harder to link directly to new acquisitions. Here’s how to handle them:

• Brand Awareness & Events: Costs associated with long-term branding (e.g., sponsorships, large-scale events) should be excluded from CAC unless they are specifically designed to generate new customer leads. These costs are important for your overall strategy but don’t directly contribute to new customer acquisition.
• Pro Tip: If an event or campaign is multi-purpose, allocate the percentage of the cost that you can confidently attribute to new customer generation. For example, if 30% of an event’s attendees are new leads, include 30% of the event cost in CAC.

3.4 Using Tools to Track Acquisition Costs:

To keep things efficient, we recommend using a CRM or marketing automation platform to track lead sources and tie them back to sales and marketing efforts. Tools like HubSpot, Salesforce, or even simple time-tracking software can help you allocate salaries and costs accurately.

4. Handling Marketing Overhead in CAC

Marketing spend often goes beyond direct lead generation. Here's a breakdown of what to include and exclude from CAC when it comes to marketing overhead:

4.1 Include in CAC:

• Performance marketing campaigns (Google Ads, Facebook Ads, LinkedIn Ads)
• Lead generation tools (SEO, PPC, landing pages)
• Content marketing efforts specifically designed to attract new leads (e.g., whitepapers, webinars)

4.2 Exclude from CAC:

• Brand-building activities (general awareness campaigns, PR)
• Event sponsorships that aren’t directly linked to new lead generation
• Marketing salaries focused on long-term strategy, customer retention, or brand positioning

5. CAC, the Rule of 40, and Company Valuation

CAC plays a crucial role in determining your company’s overall growth efficiency, which directly ties into the Rule of 40 and, ultimately, your company’s valuation.

5.1 The Rule of 40

The Rule of 40 is a simple but powerful benchmark used by SaaS companies to evaluate their growth and profitability. It’s calculated as:

Rule?of?40=Revenue?Growth?Rate?(%)+Profit?Margin (EBITDA)?(%)

A healthy SaaS company should aim for a Rule of 40 score of 40% or higher. It balances growth and profitability, making it a key factor for investors in valuing your company.

5.2 Why CAC Matters for the Rule of 40:

• CAC directly impacts profitability. The higher your CAC, the lower your profit margins, especially if your CLTV/CAC ratio is not optimized (the goal is 3:1 or higher).
• If your company is growing fast but has a high CAC and long CAC payback period (e.g., over 12 months), it may hurt profitability, making it difficult to reach the Rule of 40 target.
• On the flip side, if you have a low CAC and a strong customer acquisition strategy, your profit margins improve, which boosts your Rule of 40 score.

6. How to Improve CAC and Boost Valuation

6.1 Optimize Lead Targeting: Focus your marketing efforts on high-value leads to improve conversion rates and reduce the time (and cost) it takes to acquire new customers.

6.2 Shorten Sales Cycles: Streamline the sales process through automation, clearer messaging, and better targeting. Shorter sales cycles reduce the cost of acquiring customers, improving CAC.

6.3 Increase Upsell and Cross-Sell Opportunities: While upsell revenue isn’t part of CAC, retaining and expanding the value of current customers can indirectly lower CAC by improving customer lifetime value (CLTV).

6.4 Monitor and Adjust Spending: Keep a close eye on marketing and sales spending, and regularly review how much of it directly leads to new customer acquisition. Reallocate funds to high-performing channels.

7. Benchmarks & Best Practice CAC Numbers

Understanding where your CAC stands compared to industry benchmarks can help guide your acquisition strategy and ensure profitability. Below are some common CAC benchmarks, comparing both Swedish SaaS companies and US best practices.

7.1 Swedish SaaS Industry Benchmarks:

Small to Mid-Sized SaaS Companies (10-50 employees):

• CAC: Typically ranges between $2,000 to $10,000 (approx. 20,000 to 100,000 SEK) per customer, with early-stage companies leaning toward the higher end.
• CAC Payback Period: Best practice is to target under 12 months, especially in competitive SaaS markets like the US.
• CLTV/CAC Ratio: US SaaS companies strive for a ratio of 3:1 or higher.

Mid-to-Large SaaS Companies (50-200 employees):

• CAC: Often ranges between $10,000 to $50,000 (approx. 100,000 to 500,000 SEK) per customer, with more sophisticated enterprise sales models.
• CAC Payback Period: Aim for under 9 months, especially as the company matures.
• CLTV/CAC Ratio: 3:1 to 5:1 is the gold standard, indicating a high return on customer acquisition investment.

8. Final Thoughts on CAC & Growth

Achieving a healthy CAC and payback period is essential for scalable growth. Swedish SaaS companies should aim for a payback period of 12 months or less, while US SaaS companies often push for under 9 months. Regardless of geography, maintaining a CLTV/CAC ratio above 3:1 will position your business for long-term profitability and sustainable growth.

CAC, when managed properly, not only drives short-term sales success but also ensures your company can balance growth and profitability, helping you hit the Rule of 40 and drive higher valuations.

9. Contact Scalex for CAC Optimization and Valuation Growth

Understanding and optimizing your Customer Acquisition Cost (CAC) is more than just a tactical move—it's a strategic lever that can significantly impact your company's valuation. At Scalex, we help SaaS companies like yours not only improve operational efficiency but also maximize enterprise value by focusing on growth drivers, such as CAC, in our tailored Owner & Board services.

How CAC Affects Your Valuation

CAC is closely linked to your company’s profitability and scalability, both of which are critical factors in determining the overall value of your business. When your CAC is high or inefficient, it erodes margins and lengthens the time it takes to break even on customer acquisition costs. This can directly impact your company’s attractiveness to investors or buyers, potentially lowering your valuation.

At Scalex, we work with your board and management team to:

• Identify inefficiencies in your CAC: We help uncover areas where acquisition costs are too high or where marketing and sales strategies are underperforming.
• Develop strategies to lower CAC: By optimizing your sales and marketing processes, targeting high-value customers, and streamlining your acquisition channels, we can help reduce your CAC and shorten your payback period.
• Align CAC with company growth: We focus on balancing growth and profitability, ensuring that your acquisition costs are in line with your long-term valuation goals.

Improving Your Valuation Through the Board

At Scalex, we believe that the board plays a pivotal role in driving strategic improvements, especially when it comes to CAC optimization. Our valuation services work hand-in-hand with our Owner & Board expertise to develop actionable strategies that focus on key areas, including:

• Optimizing acquisition channels to drive higher ROI on marketing and sales.
• Setting measurable CAC targets in line with your revenue growth and profitability goals.
• Regularly monitoring and adjusting CAC strategies at the board level to stay agile and responsive to market conditions.

By helping you develop an efficient acquisition strategy through structured board work, we can significantly improve your CLTV/CAC ratio, reduce your CAC payback period, and, ultimately, boost your company’s valuation.

Author: Ashley Tott