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20
Jan
Even though you’re not here and nowhere to be found, my heart says you’re still here and everywhere to be found.
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01
Jan
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25
Dec
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23
Dec
CAC Ratio - Customer Acquisition Cost Ratio. How do you know if your sales and marketing investments are ultimately “profitable”? The answer to this question can be found through the CAC Ratio. We introduced this concept several years ago (and it is similar to Josh James’ “Magic Number” at Omniture/Adobe), but we’ve recently refined it further to include only NEW CMRR Gross Margin booked, to better account for businesses with slower growth and/or higher churn in these volatile markets. This single number is the key to determining your level of sales and marketing investment. It can be calculated by looking at a quarterly GAAP P&L: just divide the NEW annualized net gross margin added during the quarter (gross new CMRR x your average Gross Margin % x 4 quarters; forget the effect of churn for now), by the sales and marketing costs of the previous quarter excluding any account management costs attributed to your “farmer” organization.
The CAC ratio determines how much of your sales and marketing investment is paid back within a year: a CAC ratio of 0.5 for example means that half of your investment is paid back per year, so it is a two year payback period. So how should you use this ratio? The punch line is that a CAC ratio of a third (0.33) or less is bad – this suggests it takes you at least three years to payback your initial customer acquisition costs – so you should slam the brakes on your sales and marketing spending until you can improve sales efficiency. At the other end, assuming your churn rates are also low, anything above one (1) means you should invest more money immediately and step on the gas (and please call Bessemer immediately because we want to fund you!) as your customers are likely profitable within the first year.
(Source: bvp.com)
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21
Dec
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19
Dec
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10
Dec
Font site
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27
Mar
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26
Mar
(Source: fuckyeahdailyproject)
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lovequotesrus:
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