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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.
Open forentrepreneurs.com →
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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