Your SaaS Metrics Are A Result, Not A Strategy
SaaS metrics like LTV/CAC, NRR, GRR, ARR growth, and the Rule of 40 are valuable indicators of business performance, writes guest author Itay Sagie, but leaders and boards should look beyond the numbers to understand the underlying drivers to assess the company's long-term health and competitive strength. Itay Sagie Imagine sitting in a nice boardroom. The company has just presented what looks like a strong quarter.
Key Takeaways
- LTV/CAC is within the range we all like to see.
Everyone is almost ready to move on, maybe even go for a drink.
- But they do not shine a light on strategy.
They are the result of strategy - or sometimes the result of a lack of it.
- When reviewing LTV/CAC, boards should ask: Is the company clearly positioned?
- But they do not explain why customers stay or expand.
Strong dollar retention usually comes from becoming embedded in the customer's workflow.
- But a better number can come from real efficiency, or from cutting too deeply into product, customer success and future growth.
Stats & Key Facts
- #SaaS metrics like LTV/CAC, NRR, GRR, ARR growth, and the Rule of 40 are valuable indicators of business performance, writes guest author Itay Sagie, but leaders and boards should look beyond the numbers to understand the underlying drivers to assess the company's long-term health and competitive strength.
- #SaaS metrics like LTV/CAC, NRR, GRR, ARR growth, and the Rule of 40 are valuable indicators of business performance, writes guest author Itay Sagie, but leaders and boards should look beyond the numbers to understand the underlying drivers to assess the company's long-term health and competitive strength.
- #But two companies can both report a 4x LTV/CAC ratio and still be very different businesses.
- #Rule of 40 and Rule of 4: Check the quality of growth ARR growth matters, but the board should ask what kind of growth it is.
LTV/CAC is within the range we all like to see. Everyone is almost ready to move on, maybe even go for a drink. But then you ask the only question that really matters: "Why are the numbers improving?
" That is where the actual strategic discussion begins. Was growth improving because the company found a repeatable sales motion, or because it offered large discounts? Was retention strong because the product became deeply embedded in customer workflows, or because renewals had not yet come under pressure?
Was gross margin structurally strong, or were infrastructure costs simply being pushed into the future? They give us a snapshot of the business. But they do not shine a light on strategy.
For more details please read the original article at Crunchbase News.
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