What is the Cost of ARR
Slightly different than CAC (customer acquisition costs), the Cost of ARR (aka SaaS CAC ratio) measures the relationship between new and expansion bookings and sales and marketing expense. It’s different than CAC, because CAC calculates the cost to acquire one new logo. The Cost of ARR focuses on the cost to acquire annualized recurring revenue (ARR). It puts the cost on a dollar basis rather than a logo basis.
It’s one of my favorite SaaS metrics. It requires just two inputs, and it’s easy to calculate. Also, there is great data available to benchmark your performance against SaaS peers.
How to Calculate the Cost of ARR
Downloads
Download the Cost of ARR slides below.
Additional Resources
How to Calculate the SaaS Quick Ratio at The SaaS CFO