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SaaS METRICS STANDARDS
OUR APPROACH
The inconsistency in SaaS metrics calculations and formulas used across SaaS companies makes it challenging to make informed capital allocation decisions without the need to verify the input variables and calculation formulas used by each company.
Assessing the performance of a SaaS company involves evaluating common metrics that reflect the capital and operational efficiency of a SaaS company across the entire customer lifecycle, including customer acquisition, customer retention and customer expansion.
SaaS METRICS STANDARDS DEVELOPMENT STATUS
METRICS STATUS LEGEND:
STANDARD IN-PROCESS
METRIC STANDARD PUBLISHED
NOMINATION APPROVED
METRIC UNDER CONSIDERATION
FOUNDATION SaaS METRICS
Core elements known as foundation metrics are used in the calculation of many common SaaS metrics.
CUSTOMER ACQUISITION
The effectiveness of acquiring new customers can be evaluated using Customer Acquisition metrics.
These metrics not only give insights into the profitability and cash generation from investments made to acquire new customers in the long term, but also provide valuable information about the efficiency of the acquisition process.
CUSTOMER RETENTION
Customer Retention metrics assess how well a company is able to keep its customers and the associated revenue.
These metrics are crucial to understand the efficiency and effectiveness of customer retention efforts. By using these metrics, a company can build upon its existing customer relationships and maximize the lifetime value of its customers.
Customer Expansion metrics evaluate the effectiveness and efficiency of increasing revenue from existing customers.
By using these metrics, a business can gain insights into the cost of growing revenue within its existing customer base, as well as the potential value of each customer in terms of retention, upsells, cross-sells, and organic expansion. These metrics provide valuable information for understanding the potential for revenue growth within a company's current customer base.
CUSTOMER EXPANSION
OPERATING EFFICIENCY
Operating efficiency metrics measure the effectiveness of the cash-generating operations of most SaaS companies. These metrics provide insight into the efficiency of processes and functions that have a direct impact on gross profit and operating profit.
CAPITAL EFFICIENCY
Capital efficiency metrics measure the return on capital invested in the business from both the perspective of investors and operators. These metrics offer insight into the best opportunities for continued growth and returns.
METRICS INCLUDE:
ARR:CAPITAL RATIO
CASH CONVERSION SCORE
BURN MULTIPLE
ARR:FTE RATIO