Dear SaaStr: My CAC Has Doubled Over The Last Year. Should I Stop Hiring?
It’s something to dig into and potentially alarming. But … if growth remains strong and the burn rate overall is manageable and isn’t growing out of control, maybe don’t fully tap the brakes. Instead, you need to dig into why your CACs have doubled and whether it’s a temporary issue or a structural problem.
Here’s how I’d approach it:
#1. Segment Your CACs
Too many start-ups and even bigger B2B companies don’t do this. You have to. Are all your CACs doubling, or just in certain segments? For example, your core ICP (ideal customer profile) might still have reasonable CACs, but your expansion into new markets or verticals could be driving up the average. That’s normal—CACs are always higher when you’re entering new segments. If 80% of your customers are still hitting sustainable CAC goals, it may just fine to invest more in the 20% that are newer segments or ones where you are less competitive. That’s not a reason to stop or slow hiring.
#2. Look at Payback Periods
High CACs are acceptable if your payback period is still reasonable. If you’re recouping customer acquisition costs in 12 months or less, you’re probably fine. But if payback periods are stretching to 18-24 months or more, you may need to pause and figure out what’s broken before scaling further. Long CACs can be OK in big enterprise deals, but even there you often need the cash to fund them.
#3. Evaluate Your Sales Efficiency
Are your sales reps hitting quota? If not, that’s a sign your GTM engine isn’t working as efficiently as it should. Before hiring more reps, make sure your current team is performing well. Test out whether your quotas are realistic and whether your reps are closing deals at a sustainable cost.
#4. Check for Market Saturation
There’s a reason public SaaS companies generally have fairly high CACs. They’ve often begun to saturate their market. If your CACs are doubling because you’ve tapped out your easiest-to-close customers, you might need to rethink your growth strategy. Are you over-relying on paid channels that are getting more expensive? Are you running out of leads in your core market? If so, it might be time to invest in new marketing initiatives or product features to expand your TAM (total addressable market).
#5. Don’t Stop Hiring Completely—But Be Strategic
If your CACs are high but you’re still growing and your LTV (lifetime value) is strong, you don’t want to stop hiring entirely. Instead, slow down and focus on hiring only for roles that will directly improve efficiency—like a VP of Demand Gen to lower CACs or a rockstar AE who can close bigger deals faster. Cutting back too much on growth investments can hurt you long-term, especially in SaaS where revenue compounds. Marc Benioff has said every time he stopped hiring sales execs, he regretted it later.
#6. Revisit Your Budget ASAP
If you’re burning too much cash to acquire customers, you might need to reallocate your budget. Shift spend away from high-CAC channels and double down on what’s working. For example, if outbound is getting too expensive, focus on inbound or partnerships instead. Or, invest in product-led growth to reduce reliance on expensive sales motions.
#7. Maybe Just Set a Burn Rate Budget and Let The Team Figure it Out (and the Trade-offs)
Another way to back into an answer is to set a firm burn rate budget, of say -$100k a month. And let the team argue and debate where to spend it. This often will lead to the right short-term answer at least.
High CACs are a problem, but they’re not the end of the world if you address them quickly. The key is to figure out whether this is a short-term blip or a sign of deeper inefficiencies.
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