1 What is CAC and how to calculate it

CAC is the total cost of sales and marketing activities divided by the number of new customers acquired in a given period. For example, if you spend $10,000 on sales and marketing in a month, and you acquire 100 new customers, your CAC is $100. This means that for every dollar you invest in sales and marketing, you get one dollar back in revenue from a new customer. However, this is a simplified version of the formula, and there are some nuances that you need to account for.

2 What factors affect CAC

The cost of sales and marketing activities can vary depending on the type, size, and complexity of your sales cycle, the channels and tools you use, and the compensation and incentives you offer to your sales development team. For example, if you use cold calling, email, social media, and webinars to generate leads, you need to factor in the costs of phone bills, email software, social media ads, and webinar platforms. If you pay your sales development team a base salary plus commissions and bonuses, you need to include those as well. Additionally, you need to consider the time and resources spent on training, coaching, and managing your sales development team.

3 How to allocate costs to CAC

One of the challenges of measuring CAC for your sales development team is how to allocate the costs of sales and marketing activities to the specific customers that they generate. For example, if you run a webinar that attracts 100 leads, and 10 of them become customers, how do you assign the cost of the webinar to those 10 customers? There are different methods to do this, such as first-touch attribution, last-touch attribution, linear attribution, or weighted attribution. The best method depends on your business model, your sales cycle, and your goals. However, the key is to be consistent and transparent in your calculations, and to use the same method across your sales development team.

4 How to benchmark and optimize CAC

Once you have calculated CAC for your sales development team, you need to compare it with your industry average, your competitors, and your historical data. This will help you understand how well you are performing, and where you can improve. Ideally, you want to lower your CAC over time, or at least keep it stable, while increasing your revenue and customer lifetime value (LTV). To do this, you need to optimize your sales prospecting strategy by testing different channels, tools, messages, and offers, and measuring their impact on CAC. You also need to align your sales and marketing teams, and provide them with the right training, feedback, and incentives.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?