Software as a Science: Unlock Limitless Recurring Revenue Without Losing Control

by Dan Martell

Some More Details on CAC As we mentioned earlier, CAC stands for Customer Acquisition Cost—the amount of money your company is spending to get a single customer. If you’re not sure how to calculate your CAC, here’s a simple formula: CAC = (Marketing Spend + Sales Spend) / # Of New Customers During That Spending Period Let’s say you spent $5,000 on sales and marketing in a month and acquired 5 customers in the same month. Your CAC would be $1,000. Ideally, your CAC Payback Period is under 90 days. To calculate CAC Payback Period, you’ll need to know two other numbers: Gross Margin: The amount of money that is left over after you remove your Cost of Goods Sold from your Revenue (as a percentage). Average Revenue Per Account (ARPA): The average monthly revenue for each of the new accounts that were sold. Now that we have those, here’s the formula for calculating CAC Payback Period (in months): CAC Payback Period= CAC / (ARPA * Gross Margin) So, for example, let’s say your CAC was $1,000, your Gross Margin is 80 percent, and your ARPA is $300. CAC Payback Period = $1,000 / ($300 * 80%) CAC Payback Period= $1,000 / $240 CAC Payback Period = 4.16 months

Cac formula