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While this is true, if you're a one-person SaaS company you probably won't factor in your time as a cost. Sales (and some marketing) labor overhead should be fa

by tbrooks 10y ago

While this is true, if you're a one-person SaaS company you probably won't factor in your time as a cost. Sales (and some marketing) labor overhead should be factored as a direct cost to acquiring customers. If you are "profitable" as a one-person company; make sure you are paying yourself a market-rate salary or are at least factoring in your time as a cost. If not, your SaaS acquistion metrics could be way off.

api 10y ago
One thing that's a little unclear for me is how much labor should be factored into CAC in a small team venture where everybody is wearing every hat. I've done it by doing an all in CAC calculation and then a non-labor calculation and then playing with weighted averages of the two and trying to guesstimate a split. Is there an accepted canonical formula for this?
- fab1an 10y ago
  Labor/salaries should definitely be included in your CAC. The standard way to calculate it is to consider your 'fully loaded' marketing & sales spend in a given period, including salaries, which in smaller teams doing b2b sales will usually actually be the largest single item. Re: wearing different hats, you should still be able to come up with a % of time spend on actually doing marketing+sales and allocate accordingly.
- tbrooks 10y ago
  The main thing to consider is, as your customer acquistion scales, does your headcount/labor cost scale as well? If so, that should be a factor in your CAC calculation. I don't think there's one canonical formula. But here are David Skok's thoughts: "To compute the cost to acquire a customer, CAC, you would take your entire cost of sales and marketing over a given period, including salaries and other headcount related expenses, and divide it by the number of customers that you acquired in that period. (In pure web businesses where the headcount doesn’t need to grow as customer acquisition scales, it is also very useful to look customer acquisition costs without the headcount costs.)" [0] http://www.forentrepreneurs.com/startup-killer/ http://www.forentrepreneurs.com/startup-killer/
orasis 10y ago
I have never liked this advice. This is an employee mentality, not an entrepreneur mentality. An employee thinks in terms of salary and hours of work invested. An entrepreneur thinks in terms of investments and compounding returns over calendar time rather than hours worked. This makes sense because proper compounding returns will always outrun hours worked in the long run.

by tbrooks 10y ago

api 10y ago

One thing that's a little unclear for me is how much labor should be factored into CAC in a small team venture where everybody is wearing every hat. I've done it by doing an all in CAC calculation and then a non-labor calculation and then playing with weighted averages of the two and trying to guesstimate a split. Is there an accepted canonical formula for this?

fab1an 10y ago
Labor/salaries should definitely be included in your CAC. The standard way to calculate it is to consider your 'fully loaded' marketing & sales spend in a given period, including salaries, which in smaller teams doing b2b sales will usually actually be the largest single item. Re: wearing different hats, you should still be able to come up with a % of time spend on actually doing marketing+sales and allocate accordingly.
tbrooks 10y ago
The main thing to consider is, as your customer acquistion scales, does your headcount/labor cost scale as well? If so, that should be a factor in your CAC calculation. I don't think there's one canonical formula. But here are David Skok's thoughts: "To compute the cost to acquire a customer, CAC, you would take your entire cost of sales and marketing over a given period, including salaries and other headcount related expenses, and divide it by the number of customers that you acquired in that period. (In pure web businesses where the headcount doesn’t need to grow as customer acquisition scales, it is also very useful to look customer acquisition costs without the headcount costs.)" [0] http://www.forentrepreneurs.com/startup-killer/ http://www.forentrepreneurs.com/startup-killer/

orasis 10y ago

I have never liked this advice. This is an employee mentality, not an entrepreneur mentality. An employee thinks in terms of salary and hours of work invested. An entrepreneur thinks in terms of investments and compounding returns over calendar time rather than hours worked. This makes sense because proper compounding returns will always outrun hours worked in the long run.