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

At WP Engine, everything in marketing and sales is included in CAC. Salaries, commissions, coupons, direct advert spend (which you're saying you don't yet have), fees, travel and other costs associated with conferences, etc..

My advice is to err on the side of putting too much in CAC, because that helps you honestly understand the costs. Ignoring some costs just because they don't scale with company size or marginal new customers doesn't make sense to me, it simply means that certain components of your CAC you expect to get more efficient over time. Indeed, they had better! So measure it, instead of ignoring it.

You also might find that some of those direct-spend channels are not as inefficient as they seem compared to things like SEO efforts. Or the reverse! All good things to explore of course.

I'll also note that at $19/mo in the crowded space of CMS offerings you will find that very few channels will be efficient compared to the revenue you're generating. It sounds like you know that, and are dealing with it with "scalable" efforts like content marketing, however again you should be ruthless in understanding how those costs are really translating into orders and whether that's a financially sensible total strategy.


Answered 5 years ago

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