Customer Acquisition Cost

“If you look at what happened in Q two versus Q one, our CAC was three or five, right? Our average order value is about 230 dollars, right? So and we doubled our marketing spend in Q two, right? We doubled it from about 17 to thirty three million dollars in a q…”

“Our free trial credits get summed with marketing spend. If you're not doing that, then you're not really calculating your acquisition cost. So yeah trial credits or like anything free that you're giving away is cost, and it goes under, it is a marketing cost i…”

“So many businesses, and Kurt, you know this, so many businesses are focusing on customer acquisition, and costs are through the roof now. I mean, what used to be shooting fish in a barrel, you're now spending 80, 90, a hundred dollars more on customer acquisit…”

“There are always ways to optimize efficiency on acquisition. There are always new channels, new brand campaigns, new, new growth avenues. But if you don't have a sticky customer and for some reason they're becoming less sticky, your product market fit, your pa…”

“At scale, I think with scale, with assortment, with brand value new channels become unlocked, new efficiency grows leverage accelerates with assortment. I think it often only goes one way, but I don't think always.”

“Like at the end of the day, at the end of the day, it's all like a math equation, right? And so like CAC versus LTV and really like you want your cash conversion cycle to be negative. So you're like, all right, how do I spend 20 dollars to sell this book for 2…”

“When I was running the ads, I was selling the book for 29 bucks and I was, I had a one-click upsell on the back... There's a button that lets you like add a 17 or 18 dollar product onto it. And so it pushes your AOV from 29. If they buy it, it's 48. Mine was t…”

“We actually have done this funky move of we've led in a consumer product, which enables us to get the CAC incredibly cheap, and then people may move up to creator or even enterprise.”

“Small dollar things work really well if you have no CAC. Right? If there's no cost to acquire that customer, sell a dollar thing all day long, no problem. But when you have to go acquire the customer, and they're not repeat, and it's not recurring, man, that i…”

“I have a saying at Bessemer that I started saying a year ago, which is that COGS are the new CAC, which is that you can spend a lot on, on COGS, but it means that you also can't then be spending a lot on CAC in customer acquisition.”

“This is from a company that I'd ran previously. That was like a SMB this tile, right? So the average customer Life or the average revenue per customer was 39 dollars. So I was technically losing money on getting that customer. I would pay 80 dollars to make 39…”

“CAC only goes up, right? Like people just consistently get this wrong, right? And so I think that. Almost always up at scale, right? It's like, this is how the world works. And like, you know, the kind of argument that you're going to get good at something and…”

“You see countries like China, where the CAC, which is the Chinese equivalent of the FAA, is very forward-leaning, and they're already have companies in this sector that are certified, and then you have the Chinese government, which is buying hundreds of these …”

“So we don't use a lot of metrics. You don't have a clearly defined customer acquisition cost or lifetime value yet just because of the age of the company. But we do look for is exactly one of the things that you described is we want to see customers voting wit…”

“So for specific channels, they do tend to go up, but when you look at it broadly, and as you're adding new channels, when you're increasing the virality, when you're improving your activation rate, your conversion to paid, yes, you can kind of get that overall…”

“But my CAC is 16 dollars because I take this speed of value approach where I want to make you a happy customer immediately.”

“One of the dirty secrets, which, you know, it sounds like is in the venture capital world, entrepreneurs all day long will pitch you about how their CAC is very high, but the CAC will come down. Here's a secret CAC always goes up, right? It always goes up. Lik…”

“Customer acquisition cost has come down, has declined quite a bit since he pitched us.”

“Or in sales, and here's a company that basically raised ten million dollars, and it probably was undercapitalized, but it really did highlight that you can build a company by having CAC be profitable on the first order, by being focused on customer service, an…”

“If you think about standard SaaS metrics like LTV, CAC ARR, whatever, they never mention cash. Like, it's not about cash. It's like more about around accounting and predictability, but we always try to optimize for cash.”

“And so the CAC was incredible because the growth was non-commissioned because CS did not have commission, right?”

“So my view is that it's the only thing that matters. And if you ask me what's our retention, what's our activation rate, what's our CAC, I couldn't tell you really any of those things because I don't think they're real, like they're completely irrelevant. So t…”

“And a lot of teams get very nervous. Their retention rate went down. Their LTV went down. Oh my goodness. This is going to affect our ability to pay. No, your CAC also went down by probably more. And so now you have the ability to likely spend more. And you ha…”

“I love like the pretty dashboards of looking at CAC and CAC payback and burn multiple and all that stuff. But this early on, not saying that stuff isn't valuable, but it doesn't matter. All that matters is, are you solving a need Are you a painkiller or a vita…”

“There's no CAC discussion. We only talk about ROI. Because if you talk about CAC, you'll always acquire the worst cohorts.”

“And the fun fact, when you're on it and you're using it decreases your CAC by almost 20%.”

“Robin Hood, TD Ameritrade, companies like that will spend hundreds of dollars, sometimes thousands of dollars to acquire a customer.”

“There is probably not one generally accepted way of how customer acquisition costs are calculated. You can do it in many different ways. So make sure to explain how you do that or add a footnote. Otherwise, that will for sure trigger a follow up question from …”

“For everyone else, CACs almost by definition will go up over time for a couple reasons.”

“The fact that we're now capable of doing faster and better quality, example, we can scrape websites, we can scrape random content for extremely cheap and feed that back into AI prompts for outbound or for SEO drives An extremely low CAC on those channels, whic…”

“So if someone pays us 10,000 dollars a year, And it costs us 10,000 dollars to acquire them. We get paid back in 12 months, right? Anything above that, you start to question whether your economics work, anything below that, it's really good.”

“Well, cause, cause the thing about it is you, if you run it like that, and it was with zero dollars of paid spend, right? And so I have no acquisition cost. My acquisition cost is equal to my media. Cause that's the only way I was getting the word out, but my …”

“Hiring these two leaders on contract. So they were both from in my network. I could do it with a lot of trust and they started doing contract work with us like 10 hours a week and 15 and 20 until the team was big enough. And our ARR run rate was big enough to …”

“अमेरिका में CAC, दो तिहाई sales, और एक तिहाई marketing होगा, क्योंकि salesperson बहुत महेंगे होते हैं, अगर आप San Francisco में बैठे हैं, या उस मामले में London में भी”

“So in the US, the CAC would be two thirds sales and one third marketing because salespeople are so expensive if you're sitting in San Francisco and, or even London for that matter.”

“I think the fundamental innovation with EdTech is not technology. It is CAC. It is destruction of CAC.”

“LTV and calculating LTV is not a business strategy. It is a way of optimizing your marketing channels. And at the end of the day, LTV to CAC, lifetime value to acquisition cost, is simply just an arbitrage game. It is an arbitrage between what you can pay to a…”

“The public companies are actually less, they have the higher CACs than startups, believe it or not because they have so much market penetration.”

“The catch on that, and like one of the tricks is just, it's very, very difficult to be able to build awareness and be able to acquire, at least at the bottom of the market, be able to acquire at an affordable CAC if you don't have really great brand awareness,…”

“The best companies, so the top companies, have a significantly Lower CAC than the rest. Now, that might sound obvious, but when you look at the data here at the bottom of this slide, you're seeing it is, like, one dollar and five cents versus one dollar 80”

“I think most startups, when they make that argument to me, I think they're vastly underestimating the size of their market. That if you have a really, really big market, That, that you haven't picked all the low hanging fruit.”

“No one's CAC went down the last year, even though they got more efficient, no one's CAC went down despite the a hundred SAS tools we bought, despite all of these things we didn't get.”

“Because the VCs tend to be trusting and say, what's your CAC and tell me how you calculate it. And isn't that interesting? Whereas the PE people just said to say, give me all your data. I'll tell you what your CAC is fundamentally. Especially in the context of…”

“You know, a VC will look across their portfolio and think of the best CAC payback period, the best LTV to CAC, the best rule of 40, and ask you to do, you know, beat them on all four, right? It's inherently unfair. It's a form of bludgeoning, right?”

“That's going to drive your CAC up because CAC is a function of growth rate in enterprise software because you're carrying unproductive slash ramping resources, right?”

“In most successful startups that grow fairly well, The CAC will rise faster than the brand can compensate for that rise.”

“Yeah, I think for great companies, I know our CAC is really, really good. It needs to be below 20% of the price.”

“By forcing my team, our team, With this structure, we were able to unlock channels that we were not using at the time, and now we can deploy millions of dollars in these channels at an extremely efficient CAC.”

“And the reason why I think is wrong to just be obsessed with price reduction and time is often your CAC will not change linearly with the price. Meaning if you reduce the price of our product by 20%, the CAC is not going to go down 20%.”

“All the metrics that you're using you know, LTV to CAC CAC return rate, all of them don't take cash into account, okay? It's not cash. It's not cash. ARR is not cash. CAC is not cash. LTV, well, I don't know what it is, but yeah. It's a bogus metric, but, ah, …”

“You know, we figured out how to, A really good distribution engine that meant our customer acquisition costs like rounded to zero.”

“A client mostly costs us around three or 400 dollars to implement because we have automated tools that are helping us.”

“Our sales, if you look at our early years, our sales cost would be like 20% of the CAC. Marketing would be 80%.”

“And if somebody told me, I'm not sure how accurate is, but it seems accurate, you know, on average, like with an outbound SDR, it's like basically like a thousand, you know, somewhere between a 1002 thousand dollars cost per sort of qualified meeting.”

“You can also have pretty good CAC and long CLTV and go bankrupt.”

“And the way we've measured it as a company since day one, we didn't care about you know, like gap return on, on CAC. We cared about actual cash in the bank. So How much we spend, when do we actually spend the money, and how fast we get it from customers in ter…”

“SDRs are cheaper than AEs. So when you have the one-to-one ratio, you're, this is not full CAC, but it is impacting CAC. Your CAC is increasing because you have higher more expensive employees who are sitting around not doing demos.”

“When you focus on CAC and reducing CAC, what tends to happen is you actually might be doing something very damaging where you're succeeding in reducing CAC, but you're actually bringing in customers that are less valuable because those are the ones that you're…”

“I think the challenge with LTV to CAC, especially for a lot of, even ramp, right? It's only four years old is it's really hard to predict LTV. It's like a DCF. It's extremely assumption laden and it, and it's hard to know. You know, what the defiant value will…”

“Product growth is accountable for all the metrics downstream of signups. Growth marketing is accountable for signups. They're also driving or, like, have goals around CAC, their customer acquisition costs, and these are the different metrics everyone owns.”