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For Entrepreneurs

2 resources from For Entrepreneurs we point people to, and the questions each answers.

📄 Article

✓ Link checked Free Intermediate

The formula reference: CAC, months to recover CAC, magic number, net MRR churn and NRR, each with the calculation spelled out. Bookmark it and stop arguing about arithmetic.

SaaS Metrics 2.0: Detailed Definitions

From For Entrepreneurs by David Skok 20 min read

Customer lifetime is 1 divided by churn rate, so 3 percent monthly churn means a 33 month lifetime.
LTV is ARPA times gross margin percent, divided by monthly churn rate.
Months to recover CAC is CAC divided by (ARPA times gross margin percent), and should sit under 12 months, up to 20 for enterprise.
Net MRR churn is (churned MRR minus expansion MRR) divided by beginning MRR, and going negative is the goal.

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Answers How do I work out CAC payback when I do not have a finance team? What is the magic number and should I care about it at my stage?

📄 Article

✓ Link checked Free Intermediate

The piece that set the vocabulary the whole industry now uses for LTV, CAC and churn, still the best single explanation of why a SaaS business is measured differently. Long, but you only need to read it once.

SaaS Metrics 2.0: A Guide to Measuring and Improving what Matters

From For Entrepreneurs by David Skok 45 min read

The best SaaS businesses run LTV to CAC above 3, sometimes as high as 7 or 8.
They recover CAC in 5 to 7 months; past 12 months profitability goes anemic.
Net revenue churn above 2 percent a month is a warning sign, since that compounds to roughly 22 percent a year.
Everything reduces to three jobs: acquire customers, retain them, monetise them.

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Answers How do I work out CAC payback when I do not have a finance team? Which handful of GTM numbers should a first time founder actually track?

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