Hello all, how do you calculate CAC and payback period for product-led-growth b2b saas?
Take slack as an example. imagine, the engineer from 1,000+org. started using the tool on a self-service plan (monthly billing) within the team of 10. That has accelerated the interest and adoption in other departments. When the company has reached the 300-seat plan, the inside team approached the client and successfully signed the annual contract for 1,000 seats.
so how can I answer correctly what is the CAC for the 1,000-seats client?
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Great question!
The same way you account in LTV all the results of actions intended to retain or upsell, I think you should account in CAC all the costs of these actions.
In other terms, “lifetime marketing” costs should be included, from the first ad to retargeting ads to group of users, to sales closing annual contracts.
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CAC has a pretty standard definition and calculation. In your example, CAC would be whatever your cost was to acquire the engineer on the self-service plan.
Payback period is a function of the timeliness and quantity of the cash flow associated with your customers. This is a little less straightforward in your example since this ramps up over time, but a relatively simple model of expansion growth per customer could get you to this metric pretty easily.
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Makes sense! Thanks.
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Should the CAC here also include the cost to serve the client (ie, $$ lost on the freemium version of the product)
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What do you mean by money lost on the freemium version of the product? Do you mean some non-trivial, real cost you incur by having a freemium version, or the opportunity cost of a freemium account not paying, or something else?
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