Questions

I run a SaaS company based on a free open source CMS that we developed internally: LocomotiveCMS. For a while, everything was free and open source. 18 months ago we decided to turn it into a profitable company so we launched our first offer: LocomotiveHosting that provides hosting for your LocomotiveCMS websites, as well as free upgrades, daily backup and priority support for $19/month/website. I understand the importance of being able to understand my key metrics such as CAC but I just don't know how to calculate CAC accurately. We don't spend money on Adwords or on SEO which are often the examples that you'll see in blog articles talking about CAC for SaaS. And yet, it would be ridiculous to say that our CAC is $0. We do however have a full time employee working on content marketing. So among the following tasks (which are the ones that take most of our time), what should go into our CAC ? - development of the open source product, LocomotiveCMS - development of LocomotiveHosting, our paid offer - support to LocomotiveCMS users - support to LocomotiveHosting users - writing documentation and tutorials for LocomotiveCMS users. - writing guides, blog posts, sending newsletters to both LocomotiveCMS users and LocomotiveHosting customers - copywriting for our website - improving on-boarding: videos, demo websites, setting up autoresponders with vero or customer.io.... Obvioulsy, if many of the tasks mentioned above go into CAC, our CAC will soar to hundreds of dollars. Thanks a lot for your help

Here's the breakout I would use:

Acquisition: Any work or activity focused on acquiring visitors to the site should be equated as an expense towards CAC. This includes work done by your marketing person + product development focused on your funnel and conversion points.

$40,000/year broken into small timeframes that even if performing at a loss in early months scale to profitability over time. This ties performance goals directly to the role of the employee.

Activation: Once on site, work done to activate these visitors is core product development.

Revenue: If you have a sales guy emailing leads and following up to explain benefits + convert to PU's this should contribute to CAC. The idea here is to use a direct email drip from a person and automate aspects of your drip as your acquisition funnel grows and becomes too cumbersome to manage all the individual parts.

Retention: Email triggers on auto renews, direct reach-out and support on existing customers is a direct overhead expense (cost of doing business) not CAC.

Referrals: Implementing some sort of viral hook for existing customers to refer their colleagues/friends/family is in my mind core product development and should be a value add to your acquisition strategy that grows over time.


Answered 5 years ago

Unlock Startups Unlimited

Access 20,000+ Startup Experts, 650+ masterclass videos, 1,000+ in-depth guides, and all the software tools you need to launch and grow quickly.

Already a member? Sign in

Copyright © 2019 Startups.com LLC. All rights reserved.