Anyone in SaaS will have heard about new customer acquisition costs (CAC) and its relation to lifetime customer value (LTV). Also known as the CAC : LTV ratio. During SaaS podcasts, the cost of customer acquisition in a dollar sense that isolates existing business is rarely discussed. Generally, we take the necessary steps to calculate CAC, but forget about another key SaaS metric. By using a couple more pieces of data, we can measure the cost of acquiring existing businesses (think upsells and expansion!).
Ben expanded his customer acquisition template and added the missing pieces of data required to determine upset efficiency:
> ARR from New Business
> ARR from Existing Business
That's the only extension needed in the CAC calculation to determine the cost of one dollar of new ARR (or maybe MRR in your case).
At the end, you will get a cents on the dollar calculation. For every $X you spend in sales and marketing, you generate $1 of new ARR.
This calculation is very straight-forward and serves as an intuitive way to look at your sales and marketing expenses. It allows you to decide whether to invest more in these areas or to wait until you have a better traction.
