Many startup founders in the SaaS industry are asked to use data metrics for different purposes such as fundraising, board meetings, and regular KPI reviews. As a result, there is an incredible amount of content available online about SaaS metrics and their underlying definitions.
However, few articles explain how companies can leverage their data metrics to communicate engaging stories about their businesses. The storytelling framework for SaaS Metrics enables companies to organize their data and address the key questions of their stakeholders. Integrating data analytics into storytelling is key for communication with those audiences, especially venture capitalists, to truly understand a company’s history and potential.
What are the key questions that the different sets of SaaS metrics should answer?
Essentially, the questions below can be classified into two buckets: Growth or Operational Efficiency. The questions about growth target the speed and quality of a company’s development, while the remaining questions relate to operational efficiency.
These questions may not apply to every company. Bear in mind the stage of your company, such as revenue (ARR) or its current round of funding.
How quickly and consistently is ARR growing?
- YoY ARR Growth
What are the drivers of new ARR growth?
- New Logo ARR vs. Expansion ARR / Gross New ARR (New Logo ARR + Expansion ARR)
- Annual New ARR vs. Expansion ARR as a % of Beginning of Period ARR
- ARR breakdown by Industry or Customer Segmentation (e.g., SMB, Mid Market, Enterprise)
How is the quality and size of customers changing?
- New ARR per New Logo Customer
- Average Annual Growth in New Logo ARR, % in YoY
- Average ARR of All Customers, equals to “Total CARR divided by the number of customers”
How well is ARR being retained?
- Downsell ARR vs. Churn ARR / Gross ARR Churn (Downsell+Churn ARR)
- Net Dollar Retention % and Gross Dollar Retention %
What is the burn associated with this growth?
- Growth Efficiency: Net New ARR divided by Net Burn (e.g., Free Cash Flow burn, Operation Loss)
- Rule of 40% (FCF Margin + YoY Growth should be > 40%)
- Total Spend (COGS + OpEx) vs. Revenue
What is the composition of this spend and how efficiently is it being used?
- OpEx as % Revenue
- Breakdown of OpEx: Sales & Marketing, R&D, G&A and Others as a % of OpEx
- Sales Expenses vs. Marketing Expenses / Total Sales and Marketing Expenses
- CAC (Customer Acquisition Cost) Ratio, CAC Payback Period (Number of Months)
- Magic Numbers
How efficiently is the team scaling to support and further drive growth?
- Total number of employees and distribution between Sales & Marketing, R&D, G&A and Others
- OpEx per FTEs (Full-time employees)
- ARR per FTE