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Understanding CAC Attribution
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This is a basic marketing and sales funnel for an average mid-market SaaS company.
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The goal is to illustrate how to simplify and measure the GTM funnel, including offsets for sales cycle length.
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Components of CAC
TimingType
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Sales Salaries
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BDROngoing for their portion of sales cycleFixed
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AE Ongoing for their portion of sales cycleFixed
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Sales Commissions
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BDRIn month when convertedVariable
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AE In deal close month when paidVariable
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Other Sales CostAverage over entire sales cycleFixed
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Marketing
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HeadcountAverage over entire marketing cycleFixed
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Other Fixed Marketing (Tools)Average over entire marketing cycleFixed
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AdvertisingDuring lead acquisition cycleVariable
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Need to understand CAC at each stage in sales cycle
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And need to understand it on a marginal (variable costs only) and total basis
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Example Sales Cycle
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Lead AcquisitionJanuary Month 1
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Conversion to MQL by MarketingJanuary Month 1
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Conversion to SQL by BDRFebruaryMonth 2
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Conversion to ClosedWon by AEAprilMonth 4
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Advertising and Fixed Marketing we look back 3 months
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BDRs we look back 2 months
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AEs we average the current and previous month
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I call this a (M-2, S-1,0) Sales cycle for the purposes of CAC offset
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AssumptionJanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember
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New Leads100110121133146161177195215237261287
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Advertising Expense$1,000 $1,110 $1,232 $1,368 $1,518 $1,685 $1,870 $2,076 $2,304 $2,557 $2,838 $3,150
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Avg Cost per Lead$10.0 $10.1 $10.2 $10.3 $10.4 $10.5 $10.6 $10.6 $10.7 $10.8 $10.9 $11.0
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Marketing HC Cost$10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
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Conversion to MQL40%36%40%36%39%35%39%35%38%35%38%34%
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MQL (Zero offset from Lead acq month)
404048475757696883829998
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MQL per BDR per Month12
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BDRs Needed444455667799
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BDR HC Cost$5,000 $20,000 $20,000 $20,000 $20,000 $25,000 $25,000 $30,000 $30,000 $35,000 $35,000 $45,000 $45,000
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Conversion to SQL36%40%36%39%35%39%35%38%35%38%34%37%
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SQLs (1 month offset)1614191722202724322837
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BDR Commission Paid per SQL$100
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BDR Commission$0 $1,600 $1,400 $1,900 $1,700 $2,200 $2,000 $2,700 $2,400 $3,200 $2,800 $3,700
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SQL per AE per Month10
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AEs needed22223233434
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AE HC Cost$7,000 $14,000 $14,000 $14,000 $14,000 $21,000 $14,000 $21,000 $21,000 $28,000 $21,000 $28,000
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Conversion to ClosedWon25%28%26%29%27%30%29%31%30%33%31%34%
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New ClosedWon5465769711
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New ARR$10,000 $0 $0 $0 $50,000 $40,000 $60,000 $50,000 $70,000 $60,000 $90,000 $70,000 $110,000
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AE Commission10%$0 $0 $0 $5,000 $4,000 $6,000 $5,000 $7,000 $6,000 $9,000 $7,000 $11,000
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Sales Tools10%$1,200 $1,320 $1,452 $1,597 $1,757 $1,933 $2,126 $2,338 $2,572 $2,830 $3,112 $3,424
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Marketing Tools10%$1,500 $1,650 $1,815 $1,997 $2,196 $2,416 $2,657 $2,923 $3,215 $3,537 $3,891 $4,280
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Sales CAC$42,056 $41,002 $47,162 $51,138 $53,832 $61,346 $68,780 $71,738 $76,822
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Marketing CAC$12,500 $12,760 $13,047 $13,365 $13,714 $14,101 $14,527 $14,999 $15,519
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Total CAC (M-2, S-1,0)$54,556 $53,762 $60,209 $64,503 $67,546 $75,446 $83,307 $86,737 $92,341
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Average CAC$10,911$13,441$10,035$12,901$9,649$12,574$9,256$12,391$8,395#DIV/0!
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Gross Margin90%90%90%90%90%90%90%90%90%90%90%90%
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Projected CAC Payback14.5 17.9 13.4 17.2 12.9 16.8 12.3 16.5 11.2
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