Chaotic FlowStreamlined Angles on Turbulent Technologies by Joel York
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by Joel York
2 min read
Written by Joel York
I’ve wrapped up the highlights of my SaaS metrics series into a tidy SaaS Metrics Guide to SaaS Financial Performance. Like the original SaaS metrics series, this reference guide presents simple rules-of-thumb and graphic visualizations that capture the dynamic relationships between core SaaS metrics and SaaS financial performance.
It is NOT a comprehensive overview of SaaS metrics, but a deep dive into the most critical SaaS metrics with the goal of fostering intuition and deeper understanding of SaaS financial performance, including charts, formulas, definitions, sample calculations, and hyperlinks back to the full SaaS Metrics Rules-of-Thumb posts. Feel free to pass it along. Cheers! JY.
Click the image to download the
SaaS Metrics Guide to SaaS Financial Performance (PDF format)
Original SaaS Metrics Rules-of-Thumb Posts
- SaaS Metrics Rule-of-Thumb #1 – SaaS Churn Kills SaaS Company Growth
- SaaS Metrics Rule-of-Thumb #2 – New Customer Acquisition Growth Must Outpace Churn
- SaaS Metrics Rule-of-Thumb #3 – Viral Growth Trumps SaaS Churn
- SaaS Metrics Rule-of-Thumb #4 – Company Time to Profit Follows Customer Break-Even
- SaaS Metrics Rule-of-Thumb #5 – Best Case Time to Profit is Simple Break-Even
- SaaS Metrics Rule-of-Thumb #6 – Growth Creates Pressure to Reduce Total Cost of Service
- SaaS Metrics Rule-of-Thumb #7 – Churn Creates Pressure to Reduce Total Cost of Service
- SaaS Metrics Rule-of-Thumb #8 – Upselling and Upgrades Accelerate SaaS Profitability
- SaaS Metrics Rule-of-Thumb #9 – Joel’s SaaS Magic Number
- SaaS Metrics Rule-of-Thumb #10 – SaaS Customer Lifetime Value Drives SaaS Company Value
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33 Comments
Wow, super helpful! Thanks for taking the time to demystify churn, Steli. As a complete noob to SaaS metrics, I feel way more prepared to grapple with this concept after reaading your article! Cheers.
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Food for Thought….SaaS related blogs and readings
Click through some of these links to learn about S
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[…] York’s “SaaS Metrics Guide†and corresponding SaaS Metrics Rules of […]
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Food for Thought….SaaS related blogs and readings…
Click through some of these links to learn about S…
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[…] More Resources on What are some sales commissions structures for SaaS: http://saastr.wordpress.com/2012/12/17/saas-and-the-7-10-year-sales-cycle/ http://saastr.wordpress.com/2013/01/10/two-metrics-that-dont-really-matter-churn-and-sales-cycles/ http://www.amazon.com/SPIN-Selling-Neil-Rackham/dp/0070511136 http://www.huthwaite.com/ http://www.amazon.com/Trust-Based-Selling-Collaboration-Long-Term-Relationships/dp/0071461949. https://chaotic-flow.com/saas-metrics-guide-to-saas-financial-performance/ […]
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[…] More Resources on What is the best way for a SaaS company to deal with long sales cycles: http://saastr.wordpress.com/2012/12/17/saas-and-the-7-10-year-sales-cycle/ http://saastr.wordpress.com/2013/01/10/two-metrics-that-dont-really-matter-churn-and-sales-cycles/ http://www.amazon.com/SPIN-Selling-Neil-Rackham/dp/0070511136 http://www.huthwaite.com/ http://www.amazon.com/Trust-Based-Selling-Collaboration-Long-Term-Relationships/dp/0071461949. https://chaotic-flow.com/saas-metrics-guide-to-saas-financial-performance/ […]
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[…] More Resources on What are the average operating costs of SaaS companies: http://saastr.wordpress.com/2012/12/17/saas-and-the-7-10-year-sales-cycle/ http://saastr.wordpress.com/2013/01/10/two-metrics-that-dont-really-matter-churn-and-sales-cycles/ http://www.amazon.com/SPIN-Selling-Neil-Rackham/dp/0070511136 http://www.huthwaite.com/ http://www.amazon.com/Trust-Based-Selling-Collaboration-Long-Term-Relationships/dp/0071461949. https://chaotic-flow.com/saas-metrics-guide-to-saas-financial-performance/ […]
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[…] York has compiled the most important SAASÂmetrics on one sheet of paper (if you print double-sided). Joel also really nicely points to his prior posts that explain the […]
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[…] occurs when a SaaS business achieves a stable SaaS business model that allows management to monitor the key SaaS financial metrics, including recurring revenue, customer acquisition cost, churn, growth and cost of service. […]
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[…] York’s “SaaS Metrics Guide” and corresponding SaaS Metrics Rules of […]
[…] metrics challenge of previous years where all we had to do was master a relatively short list of SaaS financial metrics, the SaaS customer success metrics challenge is truly daunting–a bona fide big data problem. […]
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[…] metrics challenge of previous years where all we had to do was master a relatively short list of SaaS financial metrics, the SaaS customer success metrics challenge is truly daunting–a bona fide big data problem. […]
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[…] are witnessing a dramatic change in the way SaaS businesses are managed. While SaaS financial metrics, such as recurring revenue, acquisition cost, service cost, churn, growth and lifetime value have […]
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[…] York’s “SaaS Metrics Guide” and corresponding SaaS Metrics Rules of […]
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[…] York’s “SaaS Metrics Guide” and corresponding SaaS Metrics Rules of […]
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[…] “SaaS Metrics Guide to Saas Financial Performance” […]
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[…] York has compiled the most important SaaSÂmetrics on one sheet of paper (if you print double-sided). If you follow that link, you’ll also find York’s prior posts, […]
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[…] start with, let’s define some key terms (seeÂhereÂfor more […]
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Amazing… big thanks for sharing these metrics.
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[…] Link 3: SaaS Metric Cheat Sheet […]
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[…] flow both which can sink a company. ÂJoel York provides a good reference to the most critical SaaS metrics. ÂDavid Skok provides an excellent guide to SaaS financial […]
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What is the best way for a SaaS company to deal with long sales cycles?…
As long as the touch points in the long cycle time are managed effectively and the incentive structure recognizes the inherent nature of business this should not be a problem. A good thumb rule is to look at what is your average cost of sale compared t…
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Hi Christina,
The only way I know is to use historical numbers…or benchmarks for similar services if you don’t have historical.
If you don’t think your customer base is uniform, you will need to break it into cohorts based on whatever criteria differentiates your customers, e.g., date of signup, type of subscription plan, demographics, length of service, etc.
Joel
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Joel,
Do you have any thoughts on best ways to project churn on a monthly/quarterly/annual basis?
Cheers,
ChristinaReply
What is considered a “good” number when tracking monthly churn for a SaaS business in MRR$ lost?…
Peter’s comment is dead on…depends on the business. That said, 3.5% sounds strange to me….if that is 3.5%/month then it is > 50%/year (1.51=1.035^12)…which is pretty bad by most standards…might expect it from a consumer site or an event driven…
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Joel regarding your Churn Rate formula. Is C your total number of customers over all-time or for the period you are measuring (delta t)?
Example: My software service is billed monthly. I started selling subscriptions in Jan 10. I want to calculate the Churn Rate from Oct 10 to Feb 11. Does C= # of customer (Jan 10 to Feb 11) or (Oct 10 to Feb 11)?
Apologize if I’m not reading this correctly.
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[…] York’s Chaotic Flow Blog is always really useful and he did a fantastic post on SaaS Metrics and Economics. ÂJoel provides a very scientific approach and a lot of details for those who are really […]
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[…] This post was Twitted by MikeOliverAZ […]
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Joel, this is really nicely done! Thanks for putting it all together in one place!
ScottReply
Joel
You nailed it! Yet again… Technically deep and insightful. You are doing the SaaS community a huge favor. I hope you don’t mind me referencing you in my latest post http: http://bit.ly/cyUH6WCheck out OpenView Labs website labs.openviewpartners.com. Would love to get your feedback. Think of it as a mega blog for all that an early stage software company should be thinking about.
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