Here are some common SaaS metrics you might want to track, and how to build them in Causal!
Customer Acquisition Cost calculates how much it costs to acquire a
Customerin the period. Calculated using direct
Sales/Marketing Staff Costsin the appropriate period.
For example, let’s say there’s $1m
Marketing Spendin Jan 22 and then $2m in Feb 22 and Mar 22.
Marketing Spendtakes 2 months to flow down the funnel and convert to
Customers. In Mar 22 there are 4
New Customers, therefore
CACin Mar 22 should be $1m/4 = $250k rather than using the
Marketing Spendin Mar 22, which would result in $2m/4 = $500k, as this is not the relevant amount which determines the
New Customersgained in the period.
Causal’s Time Modifiers make implementing this logic very easy! If we use the same logic as above in regards to
Payroll Cost for Sales and Marketing Staffwe can produce a formula like the image below. The formula takes
Payroll Costs for the Sales and Marketing
Departmentmodified by the amount of
Timespent in the funnel. This is then divided by the the
New Customers in the Periodto arrive at the
Customer Acquisition Payback calculates the number of periods required for a
Customerto produce enough
Gross Profitto pay back their respective
CAC. The shorter the
Payback Periodthe better your business is performing!
Therefore, once you have calculated
CAC(See above) you can calculate your payback by finding your
ARPU(Average Revenue per Account) and multiplying this by your
Gross Profit Margin. to find the contribution per
CACand dividing by this
Contributioncalculates how many periods are required for the
Customerto payback their
Annual Contract Value/
Customer Acquisition Costgives indication of profitability on new contracts. After calculating
CAC(See above), take the
Annual Contract Valuein the period and divide by
CACin the period to produce this metric!
The Magic Number metric is designed to measure how efficient and effective your
Sales and Marketingspend are in a specific time period.
It is calculated by taking
Net New ARRor
New ARR + Expansion ARR - Churned ARRand dividing it by
The following general advice is given depending on your Magic Number:
- Magic Number < 0.5: A magic number this low indicates that something is wrong with your business model. Whether it be high costs relative to performance or perhaps you have not achieved product-market fit. This is not the time to invest in
Sales and Marketing, focus should be elsewhere.
- 0.5 < Magic Number < 0.75: This is generally considered to be the main threshold for the magic number. If you’re around the 0.75 mark then your sales efficiency is approaching market norms. This is a time to evaluate whether or not to increase
Sales and Marketingexpense and depends on the specific context of your business.
- Magic Number > 0.75: A magic number over 0.75 indicates that this is the time to invest in
Sales and Marketing. You likely have a proven product-market fit and solid CAC payback periods and this is the time to take advantage!
Lifetime Value is a metric that measures, you guessed it, the Lifetime Value of a cohort of
New Customers. The higher your
You can calculate
LTVby taking (
Average Order Size in the Period*
Average # of Orders in the Period*
Contract Length) /
Churn Rate. This gives
LTVfor an average
Customerin the cohort!
Burn Multiple calculates how much
Cashis being used to generate new business and is used as a guide on sustainability of the current business model. The higher the Burn Multiple, the more the start-up is burning to achieve each unit of growth. The lower the Burn Multiple, the more efficient the growth is.
Calculated by taking
-Net Operating Cashflowdivided by
Net New ARRor (
New ARR + Expansion ARR - Churned ARR).
The table below gives some context to how your Burn Multiple shapes up:
Net Retention Rate is a core tracked metric for most SaaS businesses. It gives an indication of the impact of
Upsellingon the business.
Calculated by taking (
Beginning ARR - Churned ARR + Expansion ARR) /
A solid SaaS company would expect to have a Net Retention Rate of at least 100% with anything above 110% considered exceptional.
Customer Retention is a key metric for any business and is measured by how many
Start of the Periodremain at the
End of the Period.
It is calculated by taking
Total Customers at End of Period-
New Customers in Period) /
Customers at the Beginning of Period.
Of course you can’t retain more than 100% of your
Customers, the closer you are to 100% the better your business is performing!