9. Confuse MRR with Cash Inflow
(or Bookings or Sales or Revenues)
9
worst practice
10. MRR:
• 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
cash inflow
(but cash inflow pays the bills!)
• 2 customers
• 1 on a $20/m monthly plan
• 1 on a $120/y yearly plan
=> MRR = $30
Example:
Predictable revenue!
Lifetime value!
Valuation multiple!
12. Churn rate
# 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!
14. Cohort analyses are the only way to get a good
understanding of retention and customer lifetimes
Image source:
15. Cohort analyses are the only way to get a good
understanding of retention and customer lifetimes
Image source:
Change in
retention over
product lifetime
Retention over
user lifetime
30. 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?
32. • 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
GAIL GOODMAN:
THE LONG, SLOW,
SAAS RAMP OF DEATH
35. • 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
Because...