CAC Payback Period vs. LTV/CAC This post was inspired by a SaaS metrics question posted on Quora. The user asks, “what is more important? CAC Payback Period or LTV/CAC?” Great question, but it left me scratching my head, because it’s a difficult question to answer anecdotally. Both are important in your SaaS business but should […]
How to Calculate and Understand the SaaS Quick Ratio
What is the SaaS Quick Ratio? You work hard to land new customers, but then you see your revenue growth and cash slip away through customer downgrades and churn. Enter the SaaS Quick Ratio. Different than the SaaS Magic Number which measures the efficiency of your recognized revenue growth against your sales and marketing spend, […]
Committed Monthly Recurring Revenue (CMRR) Defined
What is Committed Monthly Recurring Revenue (CMRR)? Committed monthly recurring revenue (CMRR) is a forward-looking SaaS metric that combines actual monthly recurring revenue (MRR) data with known bookings and churn data. It begins with your existing MRR (say, last month’s recognized MRR), adds known new bookings, and subtracts known cancellations and downgrades. For businesses who […]
Two Key SaaS Metrics that Predict Your Company’s Potential Size
Two Key SaaS Metrics that Predict Your Company’s Potential Size I remember as a kid when doctors would try to predict your full-grown height based on a few measurements. Well, what if I told you I can do the same thing for your SaaS company but with more accuracy? Give me three numbers, and I […]
The SaaS P&L Explained – Where Metrics and Margins are Born
You can’t manage a SaaS business by only using the standard financial statements. To really understand the underlying economics of your business, you must have a properly structured “software” or SaaS P&L (Profit and Loss Statement). You must also calculate the relevant SaaS metrics and margins for your business. The SaaS P&L Explained “infographic” below […]
How to Forecast Your Sales Team Headcount While Scaling Bookings
Sales Team Headcount Forecast If you have a detailed forecast model, extending the forecast time frame by adding more columns is very easy. The hard part is scaling your expense base so that you don’t have unbelievable margin and net income expansion. One area of the P&L that I struggle with is the sales team […]
How I Calculate the CAC Payback Period
CAC Payback Period is a top operator and investor metric. It’s part of my Five Pillar SaaS Metrics Framework. It’s core to GTM efficiency calculations. There are many flavors of CAC Payback Period now. I’ll cover the traditional metric that you must master in your SaaS business. However, you should consider the Dollar-based CAC Payback […]
What the SaaS Magic Number of One is Not Telling You
Why the SaaS Magic Number of One is So Lonely The SaaS Magic Number is a sales-related SaaS metric that determines your efficiency in generating incremental recurring revenue. In the SaaS community, a SaaS Magic Number of 1 or greater is considered ideal, but should you really pour more money into sales and marketing if […]
The Forgotten Sales Efficiency Metric
Sales Efficiency Metrics – Cents on the Dollar Recently, I was reading a Tom Tunguz article on how to compensate sales teams. In his article, he cites sales efficiency metrics and customer acquisition costs on a dollar basis from the recent Pacific Crest Securities SaaS survey. It is an interesting way to look at CAC. […]
So you want to jump on the subscription pricing bandwagon?
Switching From One-time Sales to Subscription Pricing Subscription pricing has become an extremely popular revenue model these days. It seems like any product or service such as wine, tea, cosmetics, or HVAC maintenance can be purchased via a subscription. One-time sales seem to be a thing of the past. You can’t blame businesses for jumping […]