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20VC: The Metrics That Matter in SaaS Today; Why CaC Payback is Flawed & CAC Ratio is Better, Why You Need to Hire Three Sales Reps at a Time, How to Forecast in 2024 & Biggest Mistakes Made Forecasting & How to Make Customer Success Sell More with Dave K
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
Metrics That Matter in SaaS and the Importance of Simple Metrics
The importance of using simple and basic metrics in SaaS is highlighted as they are more difficult to manipulate. Common ways of manipulating metrics include excluding the cost of customer success and using GAP sales commissions which get amortized. It is essential to include sales commissions and customer success in the sales and marketing cash ratio and avoid amortizing the sales commissions. A good cap ratio is suggested to be 1.5 or less for an enterprise and 1.0 for an SMB, with the presumption that enterprises have larger deals and longer lifetimes. It is emphasized that as an operator, the focus should be on new ARR, not net new, to avoid the complications introduced by churn. This difference in perspective between operators and investors when evaluating metrics is acknowledged, with investors primarily concerned about the impact on the water level in the bucket, while operators focus on the spending required to generate new ARR.
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