In my last post, here, I’ve talked about how much I love working with startups. Their passion always mesmerizes me, and although I warn myself, “don’t make it personal”, I make it personal and absorb all the excitement they have.

So, these days, I monitor one lack of knowledge pattern in my last couple of clients. Before meeting me, they are prepared to talk about their financials since I am giving financial service consultancy, Mrs Obvious! However, from the investors’ perspective, your sales or your decrease in travel expense (since your angel investor/VC also live on the Earth and are probably aware of Covid-19) don’t mean a lot by themselves. Ok, you achieved something in the past (Good for you!), but will you be able to sustain this sales amount in the future? To be sure, they will need some metrics. I hope the “Metric” term doesn’t frighten you; it is not a machine learning algorithm for automated calculation of the forecast of my daughter’s tantrum time after all!… Oh wait, you are probably a SaaS founder, right? Maybe you can do some Python magic about it?

I did a nice coloured board about the metrics below 👇

SaaS Metrics

SaaS Metrics — Business Growth

Bookings: Value of a customer’s financial commitment over a contract term. Contracts signed with retailers, premium app users, data buyers, ads.

TCV: Total contract value. The amount a retailer/data buyer/advertisers/premium users would pay you.

ACV: Annual contract value. The amount you are paid annually.

ARR: Annual recurring revenue. Annualized value of a company’s recurring revenue from active subscriptions as of a particular day. You should add an ARR Analysis.

Revenue: Recognized upon delivery over the contract term (from subscription start to end dates) per GAAP rules.

SaaS Metrics — Product Stickiness

Churn Rate: Rate of leaving customers. It is also one of the most important metrics because a significant monthly churn rate (i.e., 5% churn/month) means losing half of the customers in a year. (54% churn/year)

Retention: % of customers stayed. Measure all existing customers.

Renewal Rates: Measure only customers up for renewal.

SaaS Metrics — Unit Economics

Customer Lifetime Value (LTV): Revenue or profit generated from an average customer over their lifetime.

Customer Acquisition Cost (CAC): How much does it take to convince a new customer to buy a product? Sales and marketing costs spend to acquire new customers.

The Magic Number: Measure sales and marketing efficiencies for the business. Compares the most recent quarter’s growth in revenue vs sales and marketing cost.

SaaS Metrics — P&L Metrics

Financial Model (P&L): Includes Revenue, COGS (Cost of Goods Sold –Direct costs incurred to run the product), Opex (Operating Expense — Costs not directly related to running the product), EBITDA (Earnings Before IncomeTax, Depreciation, and Amortization).

Profitability Metrics: Gross Margin, EBITDA, FCF.

Free Cash Flow Margin (FCF): Free cash flow means “cash in the door.” FCF includes the change in working capital (cash inflow and outflow from billings, receivables, and payables) and capital expenditure (Investment in IT infrastructure and equipment).

They’re like randomly pressed keys caps lock on, I know. But trust me, without showing,

1- a calculated and professionally reported assumptions and metrics that show your business’ growth,

2- your product’s stickiness,

3- how much does it cost your business to generate $1 of value through 1 unit of business,

4- your profit and loss with

5- using metrics dashboard, you should be ready to be slapped by the investors you meet.

I used “be slapped” on purpose cause I did want to scare and make you ask my support for your business. You know what they say, “sex sells”, but it is soo 90’s. They make you hurry for making sell now. HURRY! You know where to click!