Confuse MRR with Cash Inﬂow
(or Bookings or Sales or Revenues)
• Monthly Recurring Revenue
• Shows how much revenue you make next month if you don‘t win
any new customers
(assuming no churn, no upgrades/downgrades, etc.)
• #1 SaaS metric. Much more important indicator than bookings or
(but cash inﬂow pays the bills!)
• 2 customers
• 1 on a $20/m monthly plan
• 1 on a $120/y yearly plan
=> MRR = $30
(by mixing up monthly with yearly plans)
# of customers who churned
# of customers who could have churned
Including customers who can‘t cancel in the
denominator screws up your churn estimate!
If you include customers who can‘t churn in
your churn calculation, you‘ll be hit by a bad
surprise once they can leave!
... or Dave McClure‘s „AARRR“ ...
(for Acquisition, Activation, Retention, Referral and Revenue)
Free Trial Signups
... you have to track the key steps of your
conversion funnel and you should be obsessed
about improving each of them.
and Account Expansions
Mix up visitors to your marketing
website with users of your software
1$ 2$ 3$ 4$ 5$ 6$
Visits$ Signups$ Signup$Rate$
This can lead to a weird chart like this: Your visits are
going up slowly but surely, but your signups are ﬂat
(and hence your signup rate goes down).
1$ 2$ 3$ 4$ 5$ 6$
Signups$ Website$visits$ Signup$Rate$
If you correctly track separate app visits from website visits it
looks like this.Turns out your signup rate didn‘t go down
(good news) but you‘re not growing website trafﬁc (bad
news), which is a very actionable insight.
Show CACs on a blended basis only
(mixing up paid and non-paid sources of leads)
• 100 customers @ $0 per customer
• 20 customers @ $500 per customer
average CACs of $83.33, but
the average is pretty meaningless
Catch the low-hanging fruits, just
don‘t expect them to scale!
Attribute all conversions
to your sales team
Do you know these cars? When small children take a tour in them,
they believe they are steering them around the curves.
If you‘re attributing all conversions to your sales efforts you‘re doing
something similar. :)
Find out how well your signups are converting
without being called by a salesperson.
A/B test and calculate the ROI on your sales
investments based on the conversion uplift.
Assume you‘re growing exponentially
• True exponential growth is very, very rare in SaaS – requires virality
which most SaaS products don‘t have
• Most SaaS companies grow linearly and with step changes
• Even a modest exponential growth rate of 10% p.m. is very hard to
sustain for a longer period of time
Reading exponential growth into linear growth
numbers can lead to wrong conclusions
Don‘t start tracking KPIs until
investors request it
• Investors want historic numbers, not just a snapshot
• Many metrics are actionable – they tell you what to focus on, when
to invest in acceleration, etc.
• Metrics help you focus your team on what matters most