Is it time to ditch the old SaaS metrics?
It’s hard to conceive of what to do without metrics like CAC payback, LTV:CAC,
or the magic number.
Here’s the thing: the traditional SaaS metrics playbook can be extremely
misleading when it comes to managing a PLG or consumption-based SaaS company.
(Battery has a helpful visual of this in their latest Software 2021 report.)
Let’s look at two examples:
📈 𝐏𝐫𝐨𝐝𝐮𝐜𝐭 𝐚𝐬 𝐚 𝐠𝐫𝐨𝐰𝐭𝐡 𝐝𝐫𝐢𝐯𝐞𝐫: Atlassian spends only 19%
of revenue on sales & marketing (slower growing New Relic spends 55% for
comparison), making its CAC payback look best-in-class. But most of their growth
is powered by the product itself through a self-service motion. In fact,
Atlassian out-spends its peers on product & engineering (47% of revenue compared
to 25% for New Relic). How do we account for the rise of product as a growth
driver?
♾️ 𝐋𝐢𝐦𝐢𝐭𝐥𝐞𝐬𝐬 𝐋𝐓𝐕:𝐂𝐀𝐂: Snowflake reported 168% net retention in
their latest earnings. With that type of growth, $1,000 from new customers would
in theory turn into $13,000 per year after 5 years. Should they try to maintain
a “healthy” CAC payback of 18-24 months? Probably not! What’s the point of
LTV:CAC if LTV is essentially limitless?
What are the "new" metrics folks are tracking?
#growth #saas
It’s hard to conceive of what to do without metrics like CAC payback, LTV:CAC,
or the magic number.
Here’s the thing: the traditional SaaS metrics playbook can be extremely
misleading when it comes to managing a PLG or consumption-based SaaS company.
(Battery has a helpful visual of this in their latest Software 2021 report.)
Let’s look at two examples:
📈 𝐏𝐫𝐨𝐝𝐮𝐜𝐭 𝐚𝐬 𝐚 𝐠𝐫𝐨𝐰𝐭𝐡 𝐝𝐫𝐢𝐯𝐞𝐫: Atlassian spends only 19%
of revenue on sales & marketing (slower growing New Relic spends 55% for
comparison), making its CAC payback look best-in-class. But most of their growth
is powered by the product itself through a self-service motion. In fact,
Atlassian out-spends its peers on product & engineering (47% of revenue compared
to 25% for New Relic). How do we account for the rise of product as a growth
driver?
♾️ 𝐋𝐢𝐦𝐢𝐭𝐥𝐞𝐬𝐬 𝐋𝐓𝐕:𝐂𝐀𝐂: Snowflake reported 168% net retention in
their latest earnings. With that type of growth, $1,000 from new customers would
in theory turn into $13,000 per year after 5 years. Should they try to maintain
a “healthy” CAC payback of 18-24 months? Probably not! What’s the point of
LTV:CAC if LTV is essentially limitless?
What are the "new" metrics folks are tracking?
#growth #saas
