There are several metrics that SaaS (Software as a Service) companies use to measure their financial health and growth potential. Some common metrics that investors look at when considering funding a SaaS company include:
1. Monthly Recurring Revenue (MRR): This is the predictable revenue generated by the company’s subscriptions each month. Investors typically want to see a steady increase in MRR over time.
2. Annual Recurring Revenue (ARR): This is the predictable revenue generated by the company’s subscriptions each year. Investors typically look for a high ARR growth rate, which indicates that the company is retaining customers and expanding its customer base.
3. Customer Acquisition Cost (CAC): This is the cost of acquiring a new customer, including marketing and sales expenses. Investors want to see a low CAC, indicating that the company can efficiently acquire new customers.
4. Customer Lifetime Value (CLTV): This is the total amount of revenue a company can expect to generate from a customer over the course of their relationship. Investors typically look for a high CLTV, indicating that the company has a loyal customer base that generates recurring revenue.
5. Gross Margins: This is the amount of revenue a company retains after deducting the direct costs of delivering its product or service. Investors typically look for high gross margins, indicating that the company has a profitable business model.
6. Churn Rate: This is the rate at which customers are leaving the company, typically measured on a monthly or annual basis. Investors want to see a low churn rate, indicating that the company is retaining its customers and providing value.
7. Net Promoter Score (NPS): This is a measure of customer satisfaction and loyalty. Investors look for a high NPS, indicating that the company has a strong brand and customer base that is likely to generate recurring revenue.
Overall, investors typically look for a combination of these metrics to evaluate the financial health and growth potential of a SaaS company when considering funding opportunities.
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