I'm raising capital to help grow my brand and would love to know what kind of CAC (Customer acquisition cost) to expect.
My store is grinbrush.com – we sell a sustainable, subscription toothbrush.
Anyone with personal products / CPG goods experience – please let me know if you can suggest a range.
Your CAC should be 30% of your customer LTV. Since you don't know that as the business is new, try to aim for what one year of revenue from a customer would be. That is in an ideal world. Your CAC will always be higher up front as you have to test, learn and optimize your marketing after launching. Always makes sure you spend as much time on retention as you do on acquiring customers because as the saying goes... it's a lot easier and cheaper to keep a customer then acquire a new one. Look at Allbirds or any DTC brand and design and branding is a big part of their marketing. Don't skimp on this as a Canadian brand.
The best way to determine your budget is to start testing.
Here is the spreadsheet (Google Ads) I've made for us in 30 min to have an idea of the minimum budget needed. I've removed the keywords and added our Conversion Rate - which is around 15%. But again, you have to update the numbers based on your results.
For an employee:
CAC = PPC Budget spent / # of clients
For a business owner:
CAC = PPC budget spent + Other costs (copy, visuals, PPC specialist fee, etc.) / # of clients
You need to keep in mind that you'll also have a churn rate. If the average lifetime of your client is more than 6 months, you could spend more.
After a couple of months, you should have 2 main segments/cohorts - clients that are staying less than your average lifetime, and loyal customers. The acquisition cost should be different because their LTV is different. 👍
If you're planning on using Google Ads, then use that spreadsheet as a starting point. For Facebook, you could reduce the cost by 20-30%.
I hope that helps.
We've built an app to easily help you calculate your CAC and ROAS. It's especially useful for investor reporting. Having myself managed a 100k/mo budget across several channels I was tired of spreadsheet and I didn't have a data-engineering team as help to build me the pipelines.
You can see it here.
Let me know your thoughts, happy to chat !