The software industry has almost finished its 10-year conversion to SaaS (software as a service). It’s software that runs on PCs, web browsers and mobile devices, and is centrally hosted on servers outside our data centers (in “the cloud”).
This technology change has enabled an even bigger business change – recurring revenue business models. The “subscription economy” has fundamentally changed how software companies design products, interact with customers and manage their operations.
Recurring revenue businesses have unique metrics that are used to manage the business and communicate with investors. These metrics and models are the modern language of software founders, executive leaders, investors and advisors.
If you run a software company, you need to understand “SaaS math” and master their practices inside your company.
Here are some great SaaS metrics articles, tools and resources that will help you get up to speed, avoid the common traps and join the conversation.
27 Awesome Resources on SaaS Metrics
- The foundation SaaS metrics explained: monthly recurring revenue (MRR), churn, customer acquisition cost (CAC), lifetime value (LTV) and average revenue per customer (ARPC), from Kissmetrics.
- Details of SaaS metrics explained in two posts, here and here, with deeper insights on LTV and CAC, by entrepreneur/VC David Skok.
- Another great explanation of the basic SaaS metrics, from SaaSMetrics.
- 18 core metrics including marketing and customer success measures with great explanations, from Databox.
- 16 SaaS metrics and 16 more from VC Andreessen/Horowitz, including financial and engagement measures.
- David Cummings’ monthly metrics with the actual tracking spreadsheet. Use this to get started.
- SaaS metrics infographic showing how the basic measures relate to each other, from RJMetrics.
- SaaS metrics glossary and definitions, from FirstOfficer.
- 7 metrics used by VCs with calculations explained, from Geckoboard.
- 87 slides with useful charts and visual insights, from entrepreneur/VC David Skok.
- 2-pager cheat sheet with SaaS metrics explained and rules of thumb, from Joel York at Chaotic Flow.
- Founders Wiki list of additional blogs and articles on SaaS metrics.
- LTV deep dive, from entrepreneur Eric Jorgensen.
- CAC optimization insights and myths, from Lincoln Murphy.
- Churn rate deep-dive with diagnostic questions, from LessChurn.
- Another churn deep-dive, from Close.io, because churn is that important.
- Churn rate insights, from Lincoln Murphy at Sixteen Ventures.
- Customer success metrics, from Groove CEO Alex Turnbull.
- Choosing one “compass metric” for your company and managing to it, from Price Intelligently.
- VC Mark Suster offers insights on what core SaaS metrics mean and how to use them.
- SaaS financial models for CFO types, from the SaaS CFO blog.
- How SaaS pricing affects the core metrics, from Price Intelligently.
- SaaS metrics for fundraising, from Inside Intercom.
- More SaaS metrics for fundraising, from VC Ali Rahimtula.
- Actual metrics from 80 companies in one spreadsheet, by Nathan Latka.
- SaaS valuation mechanics explained, with valuation ranges and relationships to core metrics.
- SaaS metrics worst practices, by VC Cristoph Janz.
Additional resources added after the original post:
- Deep dive into measuring churn rates from Dave Kellogg.
- Calculate your SaaS Growth Ceiling from Nicholas Holmes.
Don’t forget to check out the continuing conversation in the open discussions at the bottom of these posts. That’s where deeper insights and even more tricks of the trade are revealed.