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!
Don’t forget churn in
your ﬁnancial plan!
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
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.
Vice versa: Maybe it’s
not the sales person?
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
THE LONG, SLOW,
SAAS RAMP OF DEATH
Don‘t start tracking KPIs until investors
• 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
• Investors want historic numbers, not just a snapshot