SaaS Metrics Definitions

www.TheSaaSCFO.com

The metrics that do not require Excel formulas are listed on this page.
The metrics that required detailed Excel formulas to calculate will have their own tab.
Version 1.3

ANNUAL RECURRING REVENUE (ARR)

ARR is the annual value (12 months) of your recurring revenue. This could be stated on a per customer basis (that customer
annually, for example). Or it could be stated as a whole for the total value of your customers' recurring contracts. For exam
Company has $45,000,000 of ARR. This is typically meant at a point in time rather than a cumulative number (like revenue).

BOOKING
Bookings are an important number in the CMRR calculation, so let’s make sure we are on the same page here.

I define a “booking” as an executed (signed by both parties) software contract that commits the customer to the purchase o
commits the SaaS company to the delivery of the service.

A booking is not revenue…yet.  Bookings are a non-GAAP or IFRS measure, and there can be many interpretations.  A bookin
revenue based on the terms of the subscription.

MONTHLY RECURRING REVENUE (MRR)

MRR is the monthly value of your recurring revenue. This could be stated on a per customer basis (that customer brings in
example). Or it could be stated as a whole for the total value of your customers' recurring contracts. For example, ABC Saa
$4,000,000 of MRR. This is typically meant at a point in time rather than a cumulative number (like revenue).

QUALIFIED LEAD VELOCITY RATE (LVR)

LVR is the month-over-month growth in qualified leads. It's a leading indicator for your bookings and pipeline. Grow this c
should hit your targets.
Great article on SaaStr about LVR.

https://www.saastr.com/why-lead-velocity-rate-lvr-is-the-most-important-metric-in-saas/
 customer basis (that customer brings in $10,000
recurring contracts. For example, ABC SaaS
ulative number (like revenue).

same page here.

he customer to the purchase of a subscription and

many interpretations.  A booking will flow into

basis (that customer brings in $1,000 monthly, for

ntracts. For example, ABC SaaS Company has
er (like revenue).

ings and pipeline. Grow this consistently and you

AVERAGE COST OF SERVICE (ACS)
www.TheSaaSCFO.com

COST OF SERVICE ($000) Actual Actual Actual Actual Actual Actual

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15
R&D Amortization $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
Support $ 54 $ 54 $ 54 $ 54 $ 54 $ 54
R&D Net of Cap $ 75 $ 75 $ 75 $ 75 $ 75 $ 75
Account Management $ 25 $ 25 $ 25 $ 25 $ 25 $ 25
Hosting $ 25 $ 25 $ 25 $ 25 $ 25 $ 25
Cost of Service $ 230 $ 230 $ 230 $ 230 $ 230 $ 230

Recurring Customers 1,000 1,000 1,000 1,000 1,000 1,000

Avg. Annual COS/Customer $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755
Rolling 6 Month COS $ 2,755

FIXED COSTS ($000)

G&A (ex. Non-op) $ 150 $ 150 $ 150 $ 150 $ 150 $ 150

Corp Admin $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
Total Fixed Costs $ 200 $ 200 $ 200 $ 200 $ 200 $ 200

What is ACS? ACS is the average cost to serve one customer. The key to including the correct expenses is the "
departments or expenses touch existing customers on an on-going basis? The expense looks at departments ab
margin line, so it does differ from the gross margin on a software P&L.

What is it important? It identifies the cost infrastucture necessary to support your customers and identifies th
expense to serving one customer. Also, and a big also, you can't sell your SaaS product below or near ACS. You
the picture is even worse when factoring in CAC. MRR - ACS must pay off your CAC. See CAC Payback Period.

Read More

http://www.thesaascfo.com/calculate-average-cost-service/
 Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual
Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16
$ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
$ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54
$ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75
$ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25
$ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25
$ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230

1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
$ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755
$ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755

$ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150
$ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
$ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200

uding the correct expenses is the "serve" word. What

e expense looks at departments above and below the gross

t your customers and identifies the major contributors of

S product below or near ACS. You will never make money and
r CAC. See CAC Payback Period.
 Actual Fcst Fcst Fcst Fcst Fcst Fcst Fcst Fcst Fcst
May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17
$ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
$ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54
$ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75
$ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25
$ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25
$ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230

1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
$ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755
$ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755

$ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150
$ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
$ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200
 Fcst Fcst Fcst Fcst Fcst Fcst Fcst Fcst Fcst Fcst
Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17
$ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
$ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54
$ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75
$ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25
$ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25
$ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230

1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
$ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755
$ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755

$ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150
$ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
$ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200
 Fcst Fcst Fcst Fcst Fcst Fcst Fcst Fcst Fcst Fcst
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18
$ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
$ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54 $ 54
$ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75
$ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25
$ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25
$ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230 $ 230

1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
$ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755
$ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755 $ 2,755

$ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150
$ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
$ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200
 Fcst Fcst
Nov-18 Dec-18
$ 50 $ 50
$ 54 $ 54
$ 75 $ 75
$ 25 $ 25
$ 25 $ 25
$ 230 $ 230

1,000 1,000
$ 2,755 $ 2,755
$ 2,755 $ 2,755

$ 150 $ 150
$ 50 $ 50
$ 200 $ 200
ACS Economies of Scale
www.TheSaaSCFO.com

ACS + Fixed Expense

Fixed ACS Unit Cost Customers Unit Cost Customers
$ 2,400,000 $ 2,755 100 $ 26,755 1
$ 2,400,000 $ 2,755 200 $ 14,755 200
$ 2,400,000 $ 2,755 300 $ 10,755 300
$ 2,400,000 $ 2,755 400 $ 8,755 400
$ 2,400,000 $ 2,755 500 $ 7,555 500
$ 2,400,000 $ 2,755 600 $ 6,755 600
ACS Economies
$ of Scale is
2,400,000 $ a great exercise
2,755 to understand
700 $ how your unit economics
6,184 will scale
700 when you add additi
customers. And how sensitive your cost structure is or isn't when adding incremental customers. Will it take 100
customers$ or 1000
2,400,000 $ to significantly
customers 2,755 change800your
$ unit costs? 5,755 800
$ 2,400,000 $ 2,755 900 $ 5,422 900
Why is this
$ important?
2,400,000At$some the2,755point the slope of the
1,000 $ curve flattens5,155
and you'll see that adding incremental c
1,000
does not change your unit economics much. If you are in position where cash is not growing fast enough or your
$ 2,400,000
are just mediocre, it may be$ time to2,755
evaluate both1,100 $ and incremental
our fixed 4,937cost structure.
1,100
$ 2,400,000 $ 2,755 1,200 $ 4,755 1,200
Read More
$ 2,400,000 $ 2,755 1,300 $
http://www.thesaascfo.com/calculate-average-cost-service/ 4,601 1,300
$ 2,400,000 $ 2,755 1,400 $ 4,470 1,400
$ 2,400,000 $ 2,755 1,500 $ 4,355 1,500
$ 2,400,000 $ 2,755 1,600 $ 4,255 1,600
$ 2,400,000 $ 2,755 1,700 $ 4,167 1,700
$ 2,400,000 $ 2,755 1,800 $ 4,089 1,800
$ 2,400,000 $ 2,755 1,900 $ 4,018 1,900
$ 2,400,000 $ 2,755 2,000 $ 3,955 2,000
$ 2,400,000 $ 2,755 2,100 $ 3,898 2,100
$ 2,400,000 $ 2,755 2,200 $ 3,846 2,200
$ 2,400,000 $ 2,755 2,300 $ 3,799 2,300
$ 2,400,000 $ 2,755 2,400 $ 3,755 2,400
$ 2,400,000 $ 2,755 2,500 $ 3,715 2,500

ACS+FIXED Economies of Scale

Unit Cost ACS Customers

$12,000

$10.8

$10,000

$8.8

$8,000 $7.6
Cost per Customer

$6.8
$6.2
$6,000 $5.8
$5.4
$5.2
$4.9 $4.8 $4.6 $4.5 $4.4 $4.3 $4.2 $4
 $8.8

$8,000 $7.6

Cost per Customer

$6.8
$6.2
$6,000 $5.8
$5.4
$5.2
$4.9 $4.8 $4.6 $4.5 $4.4 $4.3 $4.2 $4
$4,000

$2,000

$0
- 500 1,000 1,500

Customers
 Customers
ACS Customers Customers ACS Expense ($000) Count ACS Unit Cost
$ 2,755 1,000 15,000 $ 2,755 1,000 $ 2,755
$ 2,755 1,000 14,000 $ 2,755 1,025 $ 2,688
$ 2,755 1,000 13,000 $ 2,755 1,050 $ 2,624
$ 2,755 1,000 12,000 $ 2,755 1,075 $ 2,563
$ 2,755 1,000 11,000 $ 2,755 1,100 $ 2,505
$ 2,755 1,000 10,000 $ 2,755 1,125 $ 2,449
cs will scale when
$ you add
2,755 additional
1,000 9,000 $ 2,755 1,150 $ 2,396
ental customers. Will it take 100
$ 2,755 1,000 8,000 $ 2,755 1,175 $ 2,345
$ 2,755 1,000 7,000 $ 2,755 1,200 $ 2,296
u'll see that adding
$ incremental
2,755 customers
1,000 6,000 $ 2,755 1,225 $ 2,249
not growing fast enough or your margins
t structure. $ 2,755 1,000 5,000 $ 2,755 1,250 $ 2,204
$ 2,755 1,000 4,000 $ 2,755 1,275 $ 2,161
$ 2,755 1,000 3,000 $ 2,755 1,300 $ 2,119
$ 2,755 1,000 2,000 $ 2,755 1,325 $ 2,079
$ 2,755 1,000 1,000 $ 2,755 1,350 $ 2,041
$ 2,755 1,000 500 $ 2,755 1,375 $ 2,004
$ 2,755 1,000 400 $ 2,755 1,400 $ 1,968
$ 2,755 1,000 200 $ 2,755 1,425 $ 1,934
$ 2,755 1,000 100 $ 2,755 1,450 $ 1,900
$ 2,755 1,000 - $ 2,755 1,475 $ 1,868
$ 2,755 1,000 - $ 2,755 1,500 $ 1,837
$ 2,755 1,000 - $ 2,755 1,525 $ 1,807
$ 2,755 1,000 - $ 2,755 1,550 $ 1,778
$ 2,755 1,000 -
$ 2,755 1,000 -

mies of Scale Average C

Customers Economie
$- $500 $1,000
1,000
1,025
1,050
1,075
1,100
1,125
1,150
1,175
1,200
CUSTOMERS

1,225
1,250
1,275
$4.6 $4.5 1,300
$4.4 $4.3 $4.2 $4.1 $4.0
 1,075
1,100
1,125
1,150
1,175
1,200

CUSTOMERS
1,225
1,250
1,275
$4.6 $4.5 1,300
$4.4 $4.3 $4.2 $4.1 $4.0 $4.0 $3.9 $3.8 $3.8 1,325
$3.8 $3.7
1,350
1,375
1,400
1,425
1,450
1,475
1,500
1,525
1,500 2,000 2,500 1,550

ers AVE
 Average Cost of Service
Economies of Scale
00 $1,000 $1,500 $2,000 $2,500 $3,000
$2.8
$2.7
$2.6
$2.6
$2.5
$2.4
$2.4
$2.3
$2.3
$2.2
$2.2
$2.2
$2.1
 $2.6
$2.5
$2.4
$2.4
$2.3
$2.3
$2.2
$2.2
$2.2
$2.1
$2.1
$2.0
$2.0
$2.0
$1.9
$1.9
$1.9
$1.8
$1.8
$1.8

AVERAGE COST OF SERVICE

CAC PAYBACK PERIOD
www.TheSaaSCFO.com

STEP 1 - Calculate CAC

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18

Total Sales Expense $ 350 $ 350 $ 350 $ 350 $ 350 $ 350 $ 350 $ 350 $ 350 $ 350 $ 350 $ 350 $ 350 $ 350 $ 350 $ 350
Total Marketing Expense $ 124 $ 124 $ 124 $ 124 $ 124 $ 124 $ 124 $ 124 $ 124 $ 124 $ 124 $ 124 $ 124 $ 124 $ 124 $ 124

Sales % New Biz 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60%
Marketing % New Biz 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70%

New Business Sales Exp $ 210 $ 210 $ 210 $ 210 $ 210 $ 210 $ 210 $ 210 $ 210 $ 210 $ 210 $ 210 $ 210 $ 210 $ 210 $ 210
Marketing Exp New $ 87 $ 87 $ 87 $ 87 $ 87 $ 87 $ 87 $ 87 $ 87 $ 87 $ 87 $ 87 $ 87 $ 87 $ 87 $ 87
New Cust Acquisition Costs $ 297 $ 297 $ 297 $ 297 $ 297 $ 297 $ 297 $ 297 $ 297 $ 297 $ 297 $ 297 $ 297 $ 297 $ 297 $ 297

New Customers 4 5 4 7 8 5 3 4 3 5 7 8 9 9 8 7
In Month CAC ($000) $ 74 $ 59 $ 74 $ 42 $ 37 $ 59 $ 99 $ 74 $ 99 $ 59 $ 42 $ 37 $ 33 $ 33 $ 37 $ 42
CAC based on Qtr ($000) $ 68 $ 56 $ 47 $ 45 $ 56 $ 74 $ 89 $ 74 $ 59 $ 45 $ 37 $ 34 $ 34 $ 37
Rolling 6-month CAC ($000) $ 54 $ 56 $ 57 $ 59 $ 64 $ 66 $ 59 $ 49 $ 43 $ 39 $ 37

STEP 2 - Calculate CAC Payback Period

MRR $ 5,000
ACS $ 2,500 See the link to right for ACS formula and templathttp://www.thesaascfo.com/calculate-average-cost-service/
CAC $ 37,100
CAC Payback Period - Months 14.8
𝐶𝐴𝐶 𝑃𝑎𝑦𝑏𝑎𝑐𝑘 𝑃𝑒𝑟𝑖𝑜𝑑= 𝐶𝐴𝐶/((𝑀𝑅𝑅 −𝐴𝐶𝑆))
Inputs

Demonstrating P&L View of CAC Payback Period

Months 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18
Average MRR $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000
-ACS $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500
=Gross Margin $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500
CAC ($37,100)
CAC "Debt" Balance ($34,600) ($32,100) ($29,600) ($27,100) ($24,600) ($22,100) ($19,600) ($17,100) ($14,600) ($12,100) ($9,600) ($7,100) ($4,600) ($2,100) $400 $2,900 $5,400 $7,900 $10,400 $12,900
Payback Point

Time Value of Money Effect on Payback Period

Months 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18
PV of Gross Margin $2,469 $2,439 $2,409 $2,379 $2,349 $2,320 $2,292 $2,263 $2,236 $2,208 $2,181 $2,154 $2,127 $2,101 $2,075 $2,049 $2,024 $1,999 $1,974 $1,950
CAC "Debt" Balance based on PV ($34,631) ($32,192) ($29,784) ($27,405) ($25,055) ($22,735) ($20,443) ($18,180) ($15,944) ($13,736) ($11,555) ($9,402) ($7,275) ($5,174) ($3,099) ($1,049) $975 $2,974 $4,948 $6,898
WACC 15% Payback Point
Committed Annual Recurring Revenue
www.TheSaaSCFO.com

Current ARR $ 1,000,000

Month 1 Month 2 Month 3 Month 4 Month 5

ARR 1,000,000 $ 1,055,000 $ 1,120,500 $ 1,196,500 $ 1,283,000
+ New Business 50,000 60,000 70,000 80,000 90,000
+ Upsells $ 25,000 $ 27,500 $ 30,000 $ 32,500 $ 35,000
- Downgrades $ (10,000) $ (11,000) $ (12,000) $ (13,000) $ (14,000)
- Churn $ (10,000) $ (11,000) $ (12,000) $ (13,000) $ (14,000)
CARR $ 1,055,000 $ 1,120,500 $ 1,196,500 $ 1,283,000 $ 1,380,000

Committed Annual Recurring Revenu

$2,250,000

$1,750,000
$1,605,500
$1,487,500
$1,380,000
$1,283,000
$1,250,000 $1,196,500
$1,120,500
$1,055,000

$750,000

$250,000

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7

-$250,000

ARR + New Business + Upsells - Downgrades

 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
$ 1,380,000 $ 1,487,500 $ 1,605,500 $ 1,734,000 $ 1,873,000 $ 2,022,500 $ 2,177,500
100,000 110,000 120,000 130,000 140,000 150,000 160,000
$ 37,500 $ 40,000 $ 42,500 $ 45,000 $ 47,500 $ 50,000 $ 52,500
$ (15,000) $ (16,000) $ (17,000) $ (18,000) $ (19,000) $ (20,000) $ (21,000)
$ (15,000) $ (16,000) $ (17,000) $ (18,000) $ (19,000) $ (25,000) $ (21,000)
$ 1,487,500 $ 1,605,500 $ 1,734,000 $ 1,873,000 $ 2,022,500 $ 2,177,500 $ 2,348,000

d Annual Recurring Revenue

$2,348,000

$2,177,500

$2,022,500

$1,873,000
$1,734,000
$1,605,500
$1,487,500

Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

+ Upsells - Downgrades - Churn CARR

Committed Monthly Recurring Revenue
www.TheSaaSCFO.com

Current MRR $ 1,000,000

Month 1 Month 2 Month 3 Month 4 Month 5

MRR 1,000,000 $ 1,055,000 $ 1,120,500 $ 1,196,500 $ 1,283,000
+ New Business 50,000 60,000 70,000 80,000 90,000
+ Upsells $ 25,000 $ 27,500 $ 30,000 $ 32,500 $ 35,000
- Downgrades $ (10,000) $ (11,000) $ (12,000) $ (13,000) $ (14,000)
- Churn $ (10,000) $ (11,000) $ (12,000) $ (13,000) $ (14,000)
CMRR $ 1,055,000 $ 1,120,500 $ 1,196,500 $ 1,283,000 $ 1,380,000

Committed Monthly Recurring Reven

$2,250,000

$1,750,000
$1,605,500
$1,487,500
$1,380,000
$1,283,000
$1,250,000 $1,196,500
$1,120,500
$1,055,000

$750,000

$250,000

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7

-$250,000

MRR + New Business + Upsells - Downgrades

 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
$ 1,380,000 $ 1,487,500 $ 1,605,500 $ 1,734,000 $ 1,873,000 $ 2,022,500 $ 2,177,500
100,000 110,000 120,000 130,000 140,000 150,000 160,000
$ 37,500 $ 40,000 $ 42,500 $ 45,000 $ 47,500 $ 50,000 $ 52,500
$ (15,000) $ (16,000) $ (17,000) $ (18,000) $ (19,000) $ (20,000) $ (21,000)
$ (15,000) $ (16,000) $ (17,000) $ (18,000) $ (19,000) $ (25,000) $ (21,000)
$ 1,487,500 $ 1,605,500 $ 1,734,000 $ 1,873,000 $ 2,022,500 $ 2,177,500 $ 2,348,000

Monthly Recurring Revenue

$2,348,000

$2,177,500

$2,022,500

$1,873,000
$1,734,000
$1,605,500
$1,487,500

Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

+ Upsells - Downgrades - Churn CMRR

Customer Lifetime Value (CLTV)
TheSaaSCFO.com

CLTV Formula - Advanced

(𝐴𝑛𝑛𝑢𝑎𝑙 𝑅𝑒𝑐𝑢𝑟𝑟𝑖𝑛𝑔 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 −𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑜𝑠𝑡 𝑜𝑓

𝑆𝑒𝑟𝑣𝑖𝑐𝑒)/(% 𝐶ℎ𝑢𝑟𝑛+𝑊𝐴𝐶𝐶 −𝑆𝑢𝑏𝑠𝑐𝑟𝑖𝑝𝑡𝑖𝑜𝑛 𝐼𝑛𝑐𝑟𝑒𝑎𝑠𝑒)

Inputs
ARR $ 12,000 average annual recurring revenue per customer
ACS $ 2,000 average cost of service
% Churn 5% dollar churn rate
WACC 15% weighted averace cost of capital
Subscription Increase 4% Upsell, cross-sell, product expansion, inflation, etc.

Output
CLTV Advanced $ 62,500

Customer Lifetime Value

WACC
62,500.0 5.0% 10.0% 15.0%
Churn

3%
4%
5%
6%
7%

Customer Lifetime Value

% Churn
62,500.0 3.0% 4.0% 5.0%
2%
Subscription

3%
4%
Increase

5%
6%
 Other CLTV Formulas

(𝑅𝑒𝑐𝑢𝑟𝑟𝑖𝑛𝑔 𝑅𝑒𝑣𝑒𝑛𝑢𝑒)/(% 𝐶ℎ𝑢𝑟𝑛)

Basic

(𝑅𝑒𝑐𝑢𝑟𝑟𝑖𝑛𝑔 𝑅𝑒𝑣𝑒𝑛𝑢𝑒)/(% 𝐶ℎ𝑢𝑟𝑛+𝑊𝐴𝐶𝐶)

+ WACC

(𝑅𝑒𝑐𝑢𝑟𝑟𝑖𝑛𝑔 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 −𝐴𝐶𝑆)/(% 𝐶ℎ𝑢𝑟𝑛+𝑊𝐴𝐶𝐶)

+ACS

etime Value
WACC
20.0% 25.0%

etime Value
% Churn
6.0% 7.0%
𝐶ℎ𝑢𝑟𝑛)

𝐶ℎ𝑢𝑟𝑛+𝑊𝐴𝐶𝐶)

𝐶𝑆)/(% 𝐶ℎ𝑢𝑟𝑛+𝑊𝐴𝐶𝐶)
CUSTOMER ACQUISITION COSTS (CAC)
TheSaaSCFO.com
No Lag in Marketing Expenses

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15

Total Marketing Expense $ 24 $ 23 $ 30 $ 28 $ 29 $ 24

Total Sales Expense $ CAC
78 $ is the average
76 $ cost to acquire
80 $ one
71 $new customer.
77 $ 94
Why is this important?
New Business Sales Exp $ 27 $ 27 $ 28 $ 25 $ 27 $ 33
Marketing Exp New $ It
17 $ is so important
16 $ to understand
21 $ CAC so
20 $ that you can
20 $ determine
17 if you spending too m
to the ARR or MRR that they are bringing in.
Acquisition Costs $ 44 $ 42 $ 49 $ 45 $ 47 $ 50
Learn More
New Customers 4 5 4 7 8 5
Read this post on why CAC is like debt to learn more.
In Month CAC ($000) $ 11http://www.thesaascfo.com/cac-payback-period/
$ 8 $ 12 $ 6 $ 6 $ 10
CAC based on Qtr ($000) $ 10 $ 9 $ 7 $ 7
Rolling 6-month CAC ($000) $ 8

Sales % New Biz 35% 35% 35% 35% 35% 35%

Marketing % New Biz 70% 70% 70% 70% 70% 70%

Inputs

Yellow shaded cells are input cells. In this example, marketing expense is using the current p
accounting, I am trying to align the marketing spend that most likely originated the closed d

In row 19, you need to estimate the percentage of the sales team that is dedicated to new b
dedicated to new business versus existing business.

Marketing is not as clear but I usually ask the marketing leader to get a feel for their activitie
upsells.
 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16

$ 51 $ 22 $ 36 $ 17 $ 20 $ 12 $ 29 $ 16 $ 30
er. $ 93 $ 78 $ 118 $ 88 $ 93 $ 157 $ 89 $ 92 $ 120

$ 32 $ 26 $ 34 $ 28 $ 30 $ 60 $ 37 $ 40 $ 52
n determine if$ you spending
36 $ too much
16 $ or too little
25 $ to acquire
12 $ customers
14 $ relative
9 $ 20 $ 11 $ 21
$ 68 $ 41 $ 60 $ 40 $ 44 $ 68 $ 57 $ 51 $ 73

3 4 3 5 7 8 9 9 8
e.
$ 23 $ 10 $ 20 $ 8 $ 6 $ 9 $ 6 $ 6 $ 9
$ 10 $ 13 $ 17 $ 12 $ 10 $ 8 $ 7 $ 7 $ 7
$ 9 $ 10 $ 10 $ 11 $ 11 $ 11 $ 9 $ 8 $ 7

35% 33% 29% 32% 32% 38% 41% 43% 43%

70% 70% 70% 70% 70% 70% 70% 70% 70%

ting expense is using the current period and thus refleting a short sales cycle. Like the matching principle in
most likely originated the closed deal.

es team that is dedicated to new busniess. I do this based on the headcount in my sales department that is

ader to get a feel for their activities directed towards new business lead generation versus existing business
NET NEGATIVE CHRUN
TheSaaSCFO.com http://www.thesaascfo.com/what-is-net-negative-churn-in-saas/

Net negative churn occurs when your expansion revenue from existing
customers totals more than your lost revenue from existing customers.  This SaaS
metric does not factor in any revenue from new customers, just existing
customers.

Don't get confused by all of the positive and negative percentages. Simply put,
your expansion % should be greater than your churn percentage to achieve net
negative churn.
Download the infographic via the link to the left
SaaS Quick Ratio
www.TheSaaSCFO.com

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17

New MRR/ARR $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
Expansion MRR/ARR $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75
Churned MRR/ARR $ (25) $ (25) $ (25) $ (25) $ (25) $ (25) $ (25) $ (25) $ (25)
Downgraded MRR/ARR $ (5) $ (5) $ (5) $ (5) $ (5) $ (5) $ (5) $ (5) $ (5)
Net New MRR/ARR $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100

SaaS Quick Ratio 4.2 4.2 4.2 4.2 4.2 4.2 4.2

The SaaS Quick Ratio shows the ratio of your bookings gains to your bookings losses, so you can
has both significant growth and low churn. With one metric, it's a good measure of your booki

SaaS Quick Ratio < 1: You’re dead. You could sustain a Quick Ratio of less than 1 for a month or
customer base, but anything longer and your churn is going to kill your company.

1 < Quick Ratio < 4: You’re growing, and the growth might look good, but you are making it mo
constantly keep up high levels of customer acquisition to replace lost bookings. You will grow, b

Quick Ratio > 4: You’re growing at a good rate, and doing it efficiently. Hamid won’t invest in a S
below 4. This means that a SaaS company has to be adding $4 of revenue for every $1 it’s losing
favorably upon it.
Guideline per Social Capital's Mamoon Hamid
 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18
$ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
$ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75 $ 75
$ (25) $ (25) $ (25) $ (25) $ (25) $ (25) $ (25) $ (25) $ (25) $ (25) $ (25) $ (25) $ (25)
$ (5) $ (5) $ (5) $ (5) $ (5) $ (5) $ (5) $ (5) $ (5) $ (5) $ (5) $ (5) $ (5)
$ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100

4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2

our bookings losses, so you can see immediately if your company 𝑆𝑎𝑎𝑆 𝑄𝑢𝑖𝑐𝑘 𝑅𝑎𝑡𝑖𝑜 =(𝑁𝑒𝑤 𝑀𝑅𝑅+𝐸𝑥𝑝𝑎𝑛𝑠𝑖𝑜𝑛 𝑀𝑅𝑅)
a good measure of your bookings net inflow or outlfow.

tio of less than 1 for a month or two if you already have a good
ll your company.

good, but you are making it more difficult for yourself as you have to
e lost bookings. You will grow, but slowly, and less efficiently.

ently. Hamid won’t invest in a SaaS company with a Quick Ratio

revenue for every $1 it’s losing for investors to even start looking
 Nov-18 Dec-18
$ 50 $ 50
$ 75 $ 75
$ (25) $ (25)
$ (5) $ (5)
$ 100 $ 100

4.2 4.2

𝑀𝑅𝑅+𝐸𝑥𝑝𝑎𝑛𝑠𝑖𝑜𝑛 𝑀𝑅𝑅)/(𝐷𝑜𝑤𝑛𝑔𝑟𝑎𝑑𝑒 𝑀𝑅𝑅+𝐶ℎ𝑢𝑟𝑛 𝑀𝑅𝑅)