The document discusses key metrics for running a successful subscription business. It identifies four metrics that provide an operational framework: 1) efficient customer acquisition and recurring revenue growth, 2) churn measurement and management, 3) net recurring profit margin, and 4) a "golden metric" unique to each individual business that pinpoints alignment to long-term revenue growth. It emphasizes the importance of winning new customers profitably and maintaining a profitable relationship with existing customers over time.
4. Tech companies are trying to make big ideas
and big plans a reality.
• Today’s companies are continuously evolving.
5. Tech companies are trying to make big ideas
and big plans a reality.
• Today’s companies are continuously evolving.
• Retrospective, isolated measures are not enough.
6. Tech companies are trying to make big ideas
and big plans a reality.
• Today’s companies are continuously evolving.
• Retrospective, isolated measures are not enough.
• Are we on track to achieve the goals of our business plan?
7. Tech companies are trying to make big ideas
and big plans a reality.
• Today’s companies are continuously evolving.
• Retrospective, isolated measures are not enough.
• Are we on track to achieve the goals of our business plan?
We need new metrics that measure our progress on forward-looking plans
and incorporate cohesive measures of the critical elements of our business.
9. The four key metrics are:
1.) Efficient customer acquisition and ARR growth
10. The four key metrics are:
1.) Efficient customer acquisition and ARR growth
2.) Churn measurement and management
11. The four key metrics are:
1.) Efficient customer acquisition and ARR growth
2.) Churn measurement and management
3.) Net recurring profit margin
12. The four key metrics are:
1.) Efficient customer acquisition and ARR growth
2.) Churn measurement and management
3.) Net recurring profit margin
4.) The "golden metric" unique to your business
16. 1.) Efficient customer acquisition and ARR Growth
• Customer acquisition and increased ARR is necessary
for growth
17. 1.) Efficient customer acquisition and ARR Growth
• Customer acquisition and increased ARR is necessary
for growth
• Efficient customer acquisition supports the long-term
value of the business
18. Month 3
Customers
Opening 24
New 15
Churned (1)
Customer Acquisition Cost (CAC) = total sales and marketing costs = 3,721 = 256$ Closing 38
number of customers acquired 15
Revenue 3,813
COGS 1,144
Gross Profit 2,669
Sales and Marketing (3,721)
Product (992)
G&A (248)
Expenses (4,961)
EBITDA (2,292)
Cash (6,984)
CAC 256$
Months to recover CAC 3.7 mths
Churn 2%
Recurring profit margin 1,429
LTV 1,681
LTV:CAC 6.56
19. Lifetime Value (LTV) = the discounted future cash flows
from a customer over its lifetime
20. Lifetime Value (LTV) = the discounted future cash flows
from a customer over its lifetime
• Companies generally aim for ratio of LTV : CAC of greater than 3x
21. Lifetime Value (LTV) = the discounted future cash flows
from a customer over its lifetime
• Companies generally aim for ratio of LTV : CAC of greater than 3x
• Difficult to calculate
22. Months to Recover CAC
Months to recover CAC = Cost of Acquisition = 256$ = 3.7 months
GP from new customers 100 x 70%
23. Months to Recover CAC
What is a good CAC recovery period?
• For enterprise businesses: less than 12 months
• For SMB businesses: less than 6 months
Months to recover CAC = Cost of Acquisition = 256$ = 3.7 months
GP from new customers 100 x 70%
24. Months to Recover CAC
What is a good CAC recovery period?
• For enterprise businesses: less than 12 months
• For SMB businesses: less than 6 months
Months to recover CAC incorporates:
• New customers acquired
• Sales and marketing cost
• Revenue, COGS, and gross profit generated by new customers
Months to recover CAC = Cost of Acquisition = 256$ = 3.7 months
GP from new customers 100 x 70%
26. 2.) Churn measurement and management
Churn = the rate at which we lose customers or revenue over time.
27. 2.) Churn measurement and management
Churn = the rate at which we lose customers or revenue over time.
The key is to have a measure that:
• Closely approximates the average lifetime of the customer
• Is measured consistently
28. 2.) Churn measurement and management
Churn = the rate at which we lose customers or revenue over time.
The key is to have a measure that:
• Closely approximates the average lifetime of the customer
• Is measured consistently
Churn incorporates:
• The rate of ARR growth and trajectory of the customer journey
• Customer support costs
• Whether product spend is driving retention
• Whether pricing strategy is effective
34. 4.) The “golden metric”
The “golden metric” = the key element that pinpoints alignment
to the long-term revenue growth and success of your business
36. Conclusion
The key to success in a SaaS business = winning new customers profitably
and having an ongoing profitable relationship with those customers
37. Conclusion
The key to success in a SaaS business = winning new customers profitably
and having an ongoing profitable relationship with those customers
We need a plan that incorporates:
1.) Efficient customer acquisition and ARR Growth
2.) Churn measurement and management
3.) Net recurring profit margin
4.) The “golden metric”
38. Presenter – Matthew Tribe
• matthew@adeptfinance.com.au
• linkedin.com/in/matthew-tribe/