There are several key SaaS metrics to know in evaluating a startup.

Here’s a summary of the key metrics:

SaaS Quick Ratio  — New MRR divided by the churned MRR.

This measures how efficient your growth is.  

Low efficiency will make scaling difficult.

LTV: CAC — Lifetime value to Cost of Customer Acquisition

This measures how long customers continue to use the product and compares it to the cost of acquiring that customer.

An early-stage company should see a 3:1 ratio.

Over time, it should improve to 5:1 and later to 7:1

Churn Rate

This measures how many customers drop off during a time period, such as a month.

Segment the customers into groups to examine churn to see where the business is not succeeding.

40% Rule

Growth and profitability should add up to 40% or more.

There’s a tradeoff between growth and profitability.

The more invested in growth, the less profitability.

This shows the viability of the business regardless of whether or not they focus on growth or profitability.

Use these metrics to understand a potential startup investment.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.
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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.