Is a somewhat incomplete metric. Aka, CLTV paired and measured with CAC tells the real story of the long term growth and longevity of you business. An 8 month CAC payback with a 4 yr CLTV is mathematically less attractive than a 15 month CAC payback with a 9 year CLTV isn’t it? Curious if you agree?
Dino, I agree wholeheartedly. I actually feel the same way about using LTV in a vacuum. You can't really have one without the other. They lack context.
Wow what a fantastic article - well written and extremely informative. Most importantly, super clear.
I don’t really have a “smart” question to ask here because this isn’t my domain of expertise, so I’ll just say that I learned a lot having gone through this a few times! Really appreciate your work : )
CJ – I've been trying to think through how to apply some of these standard SaaS calculations to my business, which is a SaaS company but we sell to K12 schools so everything is on an annual basis with the vast majority of bookings happening in Q2 for implementations that all start Aug 1 and last for a standard school year (Aug 1 - July 31). And all churn happens at one point in the year (end of the school year). Given this context, does it even make sense to report CAC-based metrics at, say, a Q1 board meeting given that virtually the entire year's marketing activities are geared towards generating sales in Q2 & Q3? Really enjoy your page – thanks, CJ!
CJ, don’t you think CAC in a vacuum
Is a somewhat incomplete metric. Aka, CLTV paired and measured with CAC tells the real story of the long term growth and longevity of you business. An 8 month CAC payback with a 4 yr CLTV is mathematically less attractive than a 15 month CAC payback with a 9 year CLTV isn’t it? Curious if you agree?
Dino, I agree wholeheartedly. I actually feel the same way about using LTV in a vacuum. You can't really have one without the other. They lack context.
I'm writing a piece for next week on LTV to CAC.
In the meantime, here's an excellent piece
https://medium.com/parsa-vc/the-importance-of-cac-payback-in-todays-market-environment-db025df33d5b
The quadrant views with logos are really insightful
Wow what a fantastic article - well written and extremely informative. Most importantly, super clear.
I don’t really have a “smart” question to ask here because this isn’t my domain of expertise, so I’ll just say that I learned a lot having gone through this a few times! Really appreciate your work : )
Thanks buddy! This was a fun one to write. Keep an eye out for next week, it will be very much in your wheelhouse
CJ – I've been trying to think through how to apply some of these standard SaaS calculations to my business, which is a SaaS company but we sell to K12 schools so everything is on an annual basis with the vast majority of bookings happening in Q2 for implementations that all start Aug 1 and last for a standard school year (Aug 1 - July 31). And all churn happens at one point in the year (end of the school year). Given this context, does it even make sense to report CAC-based metrics at, say, a Q1 board meeting given that virtually the entire year's marketing activities are geared towards generating sales in Q2 & Q3? Really enjoy your page – thanks, CJ!