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How to Calculate Your Customer Acquisition Cost (CAC) in 3 Easy Steps! - YouTube
Channel: Dan Martell
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hi there dan martell here serial
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entrepreneur investor and creator of sas
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academy in this video i'm going to teach
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you how to calculate your cac
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what i really mean to say is how to
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calculate your cost to acquire
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a customer in an easy three-step
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equation and be sure to save the end
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we're going to share with you an
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exclusive resource
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my precision scorecard that's going to
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give you clarity accountability and the
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list of metrics you need to be managing
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to move your business forward so let's
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get into it
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[Music]
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so over the years i've built five
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software companies myself and the third
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one was a venture back company i still
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remember
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when we were trying to pitch investors
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and we're sitting down meeting with them
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and they ask questions like you know
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how's your churn how's your burn rate
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and then they go what's your cat
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your costs acquire customer and we would
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give them a number
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and then they would go like wow that's
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incredible are you sure
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we're like yeah we ran the numbers we
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looked at our ads that's what it cost us
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to acquire a customer
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and they said but is that your fully
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loaded cac
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and my brain just went never heard that
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term before
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what does fully loaded cac mean and what
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am i missing because he was impressed
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with my number something tells me that
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the real number may not be as impressive
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and is probably going to negate the
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meaning in this episode i'm going to
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share with you
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how to think about cac the principles
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behind it in the equations to make sure
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you're measuring things
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right so you don't look like a weirdo in
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front of a potential investor
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number one cpa does not equal cac
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so cpa stands for cost per acquisition
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essentially what does it cost you to
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acquire a customer
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but it's not your cost to acquire
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customers it's cost per acquisition
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which is typically measured through your
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ad spent so cpa is if you're running
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ads let's say you spend a thousand
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dollars a month on acquiring customers
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through facebook
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and you get 100 customers then
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essentially you spent
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ten dollars for a cpa to acquire that
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trial sign up demo whatever your uh will
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not demo but probably paying customer
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whatever
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you use as a as a sales motion that is
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your cpa
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and it only includes for the most part
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your ad spend
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number two the cac equation so here is
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the math for you to measure the cash so
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you
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get it right the first time somebody
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asks you it is your marketing expenses
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plus your sales expense divided by the
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number of customers for that period so
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your cat can fluctuate
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on a weekly basis versus monthly versus
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quarterly versus yearly
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and what you do is for that period just
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measure up all of those expenses divided
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by the number of new customers
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you've acquired sometimes per segment if
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you're selling different plans and that
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is how you measure the cost to acquire
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customers in three
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easy steps but we've got more because
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some of you are not thinking
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of the broader picture and you don't
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want to look like you don't have the
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answer if a vc
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asks you to truly measure the fully
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loaded cac number three
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expenses what does that mean when
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somebody says you know your marketing
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expenses and your sales expense
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a lot of folks don't realize but it
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means everything it means
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salaries it means overhead your lease
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agreement
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so companies and investors will actually
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ask you to look at the square footage on
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a lease if it's 20
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of your square footage of an office is
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dedicated to sales and marketing
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they'll want that put into it also the
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software tools you know all the sas
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tools the crm tools the attribution
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tools the marketing platforms
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uh your costs for ads etc all of the
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tools associated to
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generating that revenue and some people
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okay i'm not sure if i'm there yet but
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some people
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even go as far as a portion of your
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customer success team
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that's responsible for revenue growth so
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any
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expansion revenue or retention uh where
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you're compensating i would personally
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say okay well if you're asking me to put
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my customer success team
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i'm only going to put the maybe the
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bonuses that i'm paying out based on
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retention goals or expansion revenue i'm
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not going to put their salaries because
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i kind of put that in the
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kind of the operations of the business
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but that is when somebody asks you
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what's your
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fully loaded cac it means
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lease agreements like square footage
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tools
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salaries um and any other kind of
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expenses associated to revenue
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generation so three principles to
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understand when it comes to calculating
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your cost acquire customer number one
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your cost
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per acquisition is not your cac cac is
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the simple equation of marketing sales
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expense divided by number of new
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customers and be sure
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number three that when you're looking at
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expenses you look at tools overhead
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salaries that is your fully
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loaded cac so as i mentioned at the
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beginning of this episode i want to
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share with
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you an exclusive resource called the
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precision scorecard
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it's a process and a framework that i
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created for my coaching clients to help
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them get
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visibility accountability and an
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understanding of the core metrics laid
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out in a funnel
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to help you know if your business is
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moving forward so you can click the link
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below to download your copy
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of that yourself it has all of the key
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metrics it's got the
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the reporting structure that you can
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swipe and copy
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for your own business and make sure that
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you start holding your team accountable
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to moving those numbers
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forward just click the link download
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that below and if you like this video be
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sure to smash that like button subscribe
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to my channel and leave a comment below
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and let me know what your cac is if
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you're interested in getting some
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feedback from me
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just leave that comment and as per usual
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i want to challenge you to live a bigger
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life
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and a bigger business and i'll see you
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next monday
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why are you plugging your ears because
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it's oh to listen
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