Rating

9

Recommendation

Software as a service (SaaS) executives face a different set of challenges than their counterparts at more traditional enterprises and need a different set of metrics. To help subscription businesses evaluate viability, make stop-or-go decisions, and grow faster and bigger, venture capital investor and serial entrepreneur David Skok, writing on his blog forEntrepreneurs, offers a comprehensive article describing the critical metrics for subscription businesses and ways to improve them. Although long and at times complicated, Skok’s discussion ranks as a must-read for SaaS executives and investors.

Summary

Software as a service (SaaS) enterprises – and other subscription businesses –differ from traditional businesses in that their revenue depends primarily on customer longevity. SaaS executives should focus on customer retention above all else – because their profits, growth and overall success depend on it. The critical metrics for SaaS businesses reflect customer lifetime value (LTV), typical cost to acquire a customer (CAC), churn – the percentage of customers that leave each month or year – and monthly or annual recurring revenues (MRR or ARR).

About the Author

Venture capital investor and serial entrepreneur David Skok writes at his blog, forEntrepreneurs.


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