New CAC Ratio

Rogue ID: sales.new_cac_ratio Type: Number Domain: Sales

Definition

S&M expense attributable to new-customer acquisition divided by the new-customer CARR generated in the period. Per SMSB, the cleanest read on the new-logo acquisition engine's efficiency — strips out the expansion motion which has materially different unit economics. Common pitfall: failing to split AE comp time correctly between new and expansion activities — when the same AE owns both motions, an allocation rule (often the % of OTE tied to new-vs-expansion quota) is required and must be applied consistently quarter-over-quarter.

Formula

New CAC Ratio = (S&M spend allocated to new-customer acquisition in period) / (New-customer CARR generated in period). Per SMSB §New CAC Ratio: spend allocation must follow a documented rule (e.g. fraction of S&M headcount tied to new-business quota) applied consistently.

Why it matters

Isolates the new-logo engine — when blended CAC Ratio is moving, this is the first line of split-out diagnosis. Boards use it to evaluate whether to invest more in acquisition or shift weight toward expansion.

How to interpret

Per SMSB convention, New CAC Ratio of 1.0–2.0 is the typical mid-stage SaaS band; > 2.5 sustained signals the new-logo motion is structurally expensive (often a fit problem with target segment). Should be ≥ Blended CAC Ratio (new-logo is always more expensive than expansion); if New CAC Ratio < Blended, the spend allocation between new and expansion is mis-tagged.

Calculation policy

How an AI agent should compute this KPI from messy company data. Free-text rules consumed at reasoning time — not a deterministic DSL. The most common ways to get this wrong are listed under Common miscomputations.

Inclusion rules

• Numerator: S&M spend allocated specifically to new-customer acquisition.
• Denominator: new-customer CARR generated in the period.
• When AEs run both new and expansion motions, allocate their comp by a documented rule — typically the fraction of OTE tied to new-business quota.

Exclusion rules

• Expansion-attributed S&M / CS spend from the numerator (goes in sales.expansion_cac_ratio).
• Expansion CARR from the denominator.
• Renewal CARR from the denominator.

Required inputs

• S&M spend allocated to new acquisition.
• New-customer CARR for the period.
• The documented new-vs-expansion allocation rule, applied consistently across periods.

Data-source priority

• Financials + a documented allocation model for split-role comp.
• CRM for new-customer CARR.

Edge cases

• Pure new-logo sales team (no split roles): allocation is trivial — all of that team's comp is in the numerator.
• Marketing spend that supports both new and expansion: allocate by the same documented rule; do not dump all of marketing into new-logo.
• Allocation-rule change between periods: re-state prior periods on the new rule, or the trend is broken.

Validation checks

• New CAC Ratio should be ≥ Blended CAC Ratio — new-logo acquisition is always more expensive per dollar than expansion. If New < Blended, the spend allocation between new and expansion is mis-tagged.
• New CAC Ratio of 1.0–2.0 is the typical mid-stage band; sustained > 2.5 signals a structurally expensive new-logo motion.

Common miscomputations

• No allocation rule for split-role AEs — all AE comp lands in new-logo, overstating New CAC Ratio and understating Expansion CAC Ratio.
• Allocation rule that drifts quarter to quarter — produces a trend that reflects bookkeeping, not the motion.
• Using ARR instead of CARR — same understatement as the blended ratio.
• New CAC Ratio computed < Blended CAC Ratio and shipped without catching it — a guaranteed sign of an allocation error.

Related KPIs

• sales.blended_cac_ratio
• sales.expansion_cac_ratio
• sales.cac
• sales.cac_payback_period
• sales.new_business
• sales.carr

Source

SaaS Metrics Standards Board · section: New CAC Ratio — published 2023-01-01.

Why does this cite SaaS Metrics Standards Board? Read the ontology methodology for the published vs editorial tier system, attribution rules, and dispute process.

Metric definitions reference standards published by the SaaS Metrics Standards Board (saasmetricsboard.com). imboard is not affiliated with, endorsed by, or a member of SMSB.

Stage relevance

Suggested for stages: Series A, Series B, Series C+, Public.

Default owning functions

• Sales
• Finance

Machine-readable

• This KPI as JSON: /api/ontology/sales/new_cac_ratio.json
• All Sales KPIs: /api/ontology/sales.json
• Full catalog: /api/ontology/index.json