TL;DR: This guide breaks down CAC calculation, benchmarks, and proven strategies to reduce it—so you can grow smarter, raise confidently, and protect your runway.
During your next raise, investors will ask about your CAC. It’s a no-brainer. Knowing your unit economics like the back of your hand can demonstrate financial discipline and make your SaaS or AI startup a more appealing investment.
But beyond fundraising, understanding CAC is critical to building a healthy, scalable business model, especially in 2025, when efficient growth is the name of the game. Here’s what SaaS and AI founders need to know.
What is Customer Acquisition Cost (CAC)?
Customer acquisition cost, or CAC, measures how much money it takes for a company to acquire a new customer. CAC includes costs like advertising and marketing spend, commissions, and bonuses paid. It can also include the salaries of marketers and sales managers, as well as overhead costs related to sales and marketing during the measurement period.
Why CAC Matters for SaaS and AI
Your CAC is pivotal to profitable startup growth. Early-stage SaaS and AI companies often have higher CAC costs due to experimentation with product-market fit and initial marketing costs. As you grow, it’s essential to lower costs associated with customer acquisition, so that you can grow sustainably—otherwise, you’re just scaling your burn rate…which will likely become a problem down the line.
As your SaaS or AI startup matures, your CAC plays several important roles:
- Reveals go-to-market weaknesses
- Informs fundraising and capital planning
- Allows you to forecast ROI effectively
- Measures the efficiency of growth spend
- Enables LTV:CAC ratio tracking
How to Calculate CAC
Use this simple CAC formula:
CAC = (Total Marketing Expenses + Total Sales Expenses) / No. of New Customers Acquired
When calculating your CAC, there are several ways to approach it. You should always know your blended CAC, which includes all marketing and sales channels. As you work towards optimizing your customer acquisition cost, you’ll also want to track performance in different channels, calculating your paid CAC (social ads, Google ads, and other paid advertising), content marketing/organic CAC (marketing costs associated with email marketing, organic search marketing, and website development and improvement), outside sales, inside sales, etc. Breaking down your CAC in this way will make it easier to identify opportunities for improvement.
Strategies for Reducing SaaS/AI CAC in 2025
High acquisition costs hinder (or prevent) profitability, increase your burn rate, and may even throw your future fundraising plans for a loop. Here’s how to take your CAC from out-of-control to enviable.
Benchmark Your Current CAC
If it’s not measurable, it’s not helpful. You need to begin by calculating a CAC benchmark so that you know what you’re currently paying for customer acquisition. As you test new marketing and sales strategies, you can measure the performance of each campaign and initiative. Then, because you’ve made the savvy choice to benchmark your starting CAC, you’ll be able to track which channels are most effective and where you need further improvement.
Prioritize Customer Retention
Keeping an existing customer is cheaper than acquiring a new one, and the proof is in the data. On average, it costs 5 to 25 times more to acquire a new customer than to keep an existing customer. While this is technically a backdoor answer (because we’re not talking about potential customers), the wisest founders know that reducing customer churn protects margins, helps B2B SaaS startups scale, and creates sustainable growth. It will also increase your customer lifetime value (LTV), a metric closely associated with CAC.
Top tips for increasing customer retention:
- Invest in your customer success team. Ensure they have the necessary tools in place for addressing issues that may arise with new or existing customers.
- Ensure your customer acquisition strategy is built to support monthly recurring revenue. This might look like defaulting to annual rather than monthly subscriptions.
Evaluate Your Product-Market Fit
Ensuring you have the right product-market fit can go a long way towards reducing your customer acquisition cost. How do you know if you’ve got it? If you’re struggling to get customers, you don’t have it. If you’re struggling to keep up with demand, congratulations—you’ve achieved a product-market fit.
Product-market fit questions to ask if you’re struggling with sky-high CAC:
- Is your target customer clearly identified? How does your product serve them?
- Are there any product features that would better serve your customer?
- Do you have any bugs or issues that repeatedly affect the customer experience?
Test and Iterate on All Sales and Marketing Channels
Blended CAC, the average overall cost for customer acquisition, isn’t the only one that matters. You need to get granular. It’s very rare that a B2B SaaS company would have a consistent CAC across every marketing channel. In reality, you probably have a hero channel that’s outperforming all the others and others that have a higher CAC than you need for profitable growth.
CAC calculation for individual marketing channels:
- Paid CAC = (Total Ad Spend + Ad Platform Fees) / Number of Customers Acquired by Paid Ads
- Content Marketing CAC = (Content Creation Costs + SEO Tools) / Number of Customers Acquired by Content
- Outbound Sales CAC = (SDR + Outreach Tools + Lead Data Costs) / Number of Customers Acquired via Outbound Efforts
- Partner CAC = (Partner Enablement + Commission + Revenue Share) / Number of Customers acquired via Channel Partners
- Affiliate CAC = Total Affiliate Payouts / Customers Acquired via Affiliate Referrals
Benchmark each channel. Then, experiment. Try different marketing and sales strategies. Measure performance. Adjust and try again until you find your specific recipe for profitable customer acquisition.
Tweak Your Pricing Strategy
Another way to lower CAC is to play with your pricing strategy. If you’re offering a freemium trial and potential customers consistently fall off rather than converting after the trial ends, that may be a sign that your product is priced too high. If you’re converting, but the LTV of long-term subscribers still isn’t making up for your CAC, you’re priced too low. Look at what your competition is doing. Survey your customers. Test until you find what works.
More Tools to Help You Grow
ECL has helped 300+ founders take their companies to the next level. We have the tools to help you do the same. From growth calculators to non-dilutive financing, we can help.
FAQs: CAC for SaaS and AI Startups
CAC, which stands for customer acquisition cost, measures how much it costs to convert a new customer. CAC is measured with the formula: CAC = (Total Marketing Expenses + Total Sales Expenses) / Number of New Customers Acquired.
CAC = Total Sales & Marketing Costs / Number of New Customers Acquired
If you spent $100,000 in Q1 on sales and marketing for a B2B SaaS company and acquired 250 new customers, your CAC would be $400. (CAC = $100,000 / 250 = $400)
CAC is affected by internal and external variables, including your sales cycle length, channel mix, market competition, pricing model, and team efficiency.
CAC measures the cost to acquire a customer.
LTV (Lifetime Value) measures the total revenue you expect from that customer over their lifetime.
CAC tells you what you spend to get a customer. LTV tells you how much that customer is worth. Together, the LTV:CAC ratio helps determine if your business is profitable and scalable. A healthy ratio is typically 3:1 or higher.
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