How to segment and optimize your CAC

Lots of VPs of Sales talk about CAC like it’s a single number. But CAC isn’t a number. It’s a portfolio. And every segment you sell into - SMB, MM, ENT - has its own CAC profile. If you’re burning $12K to land a $6K SMB customer, but $30K to land a $300K enterprise deal, your CAC isn’t broken. Your allocation strategy is. And if you’re still only measuring CAC at the company level? You’re flying blind. This is where leaders can separate themselves. You shouldn't just measure CAC. You should segment it, analyze it, and build around it. Here’s how to operate: 1. Stop treating CAC as a blended metric. Break it down by: - Segment: SMB vs MM vs ENT - Channel: Outbound vs Inbound vs Partner - Geography: Especially when global expansion is on the roadmap Because “our CAC is $17K” means nothing. But “our CAC in enterprise is $28K with a 9 month payback” is a decision making asset. 2. Act on what you learn. Once CAC is segmented, shift resources toward efficiency: - Reallocate reps to higher leverage segments. - Focus enablement on where ramp time is shortest. - Adjust comp plans and funnel targets to optimize payback. Basically, stop managing by gut and start optimizing by unit economics. 3. Simplify how CAC gets modeled. No 12 tab spreadsheet. No MBA required. Just start with this: - Take total S&M spend for the quarter (headcount, tech, programs, all in). - Map each cost center to the segment it supports. - Divide by new ARR closed per segment. That’s your directional CAC by segment. Clean enough to inform strategy. Tight enough to move fast. Example: Let’s say you spent $1.2M in sales & marketing last quarter. You break it down like this: - $400K was tied to your SMB motion (BDR team, paid media, onboarding). - $300K went toward mid-market (AEs, webinars, tool spend). - $500K supported enterprise (field reps, events, solutions consultants). Now, you look at new ARR: - SMB closed $150K - MM closed $600K - ENT closed $1.2M Your directional CAC per segment: -SMB = $400K / $150K = 2.67x CAC - MM = $300K / $600K = 0.5x CAC - ENT = $500K / $1.2M = 0.42x CAC On the surface, SMB looks like it’s growing. But holy moly it’s killing your efficiency. This back of the ol napkin CAC view is clean, fast, and tells you exactly where to scale or pull back. 4. Pair CAC with LTV and look for leverage. Don’t just ask, “Can we afford this rep?” Instead ask: - “Is the LTV in this segment big enough to justify our spend?” - “Are we acquiring customers we can actually retain and expand?” - “Where are we getting 4:1 returns...and where are we burning cash?” Find the segments where CAC gives you leverage anbd build everything around those. If your CAC model ends in one number, it’s not a model. It’s a guess. You don’t scale by chasing total pipeline. You scale by doubling down on efficient segments. The best revenue leaders I've known don’t ask for more leads. They ask for better economics. And they know exactly where to find them.

Heck of a write-up!! Could make a whole whitepager on this.

The one thing I would add is don’t spend more time/value on your allocation model than the benefits it will bring with the actual decisions you will derive from it

Matt LTV should be a growth target - the retention levers should be pulled more efficiently over time… CS risk forecasts should be improving if the job is being done right. I completely agree with your framework, but I’d use the forecasted retention number to decide whether it’s appropriate to ad new coverage to a segment.

Just say “no” to blended metrics across GTM. Geo coverage, segmentation, products, GTM motion (inbound/outbound, etc.). Nice post, Matt.

Matt Green - I would add one more "CAC" metric and that is the New CAC Ratio which is calculated by dividing Sales and Marketing expenses by new ARR. This provides an "efficiency" view on CAC. Best practice is to calculate this for New ARR and Expansion ARR - and as you said understanding CAC Ratio by segment is a best practice

Matt Green simplifying CAC is the crux in my view. Too often we spend more time trying to align on how to calculate vs. what we are trying to understand so we can take action.

this is such a mindset shift funny how fast decisions change when you stop looking at the average and start looking at the actual segments Matt Green

Great post Matt! I have sales folks who need to understand this methodology so they are prospecting more effectively. Your first core point is make sure you are going after the right customer! Such a no brainer that seems to get overlooked. Really good targeted list building is an essential activity! “You don’t scale by chasing total pipeline. You scale by doubling down on efficient segments.” 🔥🔥 That is fire but the real haymaker is…”The best revenue leaders I've known don’t ask for more leads.They ask for better economics.” BOOM 💥 goes the dynamite 🧨!

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