The Key Drivers for SaaS Success

SaaS/subscription businesses are much more complex than traditional businesses, and SaaS performance cannot be measured in the same way as traditional businesses are measured. Based on a talk given at the SaaStr Annual Conference in San Francisco, this slide deck offers a comprehensive and detailed look at the key metrics that are needed to understand and optimize a SaaS business, and how these can be used to drive SaaS success. This presentation includes information on:

  • An intro to SaaS metrics
  • Unit economics
  • LTV and churn: An in-depth look
  • Variable pricing axes
  • Months to recover CAC
  • The primary unit of growth: Sales
  • Understanding public SaaS companies

The Key Drivers for SaaS Success [view or download on Slideshare]


For more discussion on SaaS metrics and benchmarks, click here: Demystifying Churn: Measuring and Benchmarking this Metric.

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David Skok

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  • Juan

    Thank you for your in depth look David. I built a robust SaaS metrics spreadsheet based on your guiding template you published but was also wondering if you knew of any really good tools that would help me automatically track my SaaS metrics inside a spreadsheet? My current solutions of writing another macro that I refresh or paying for a dashboard is costing me too much. Any guidance here would be very much appreciated! Thanks

  • Hi Juan, the big issue with doing this is getting at the data, which typically resides in several systems. I have heard from several tools companies that they have built templates that do this, including Insight Squared and ChartMogul. The key thing to look for is a platform that has already built connectors to the systems you use to collect that data.
    Best, David

  • Pål Brattberg

    Thank you so much for this presentation at SaaStr David! You surely stood out, even among the many other awesome speakers. So much insight and learnings shared. Thank you!

  • Juan

    awesome! I’ll take a look at them. Thanks David!

  • sunil*j

    Hi David, thanks for your great presentation at SaaStr. Quick question about maximum size of the business based on churn rates – is this a way of baking in an assumption about long-term growth rates approximating GDP growth, so the churn (at scale) and new logo growth is a wash?

  • Hey Juan, I kindly invite you to take a look at our solution too. It’s called Saasmetrics (, and it’s truly inspired on David’s spreadsheet, among others. You can also use our APIs and build your own integrations with any data sources you want. Cheers!

  • Juan

    Thanks Leo, it says the account has been suspended.

  • Hey Juan, for some reason our home page (not the application) went down for a moment. Please feel free to come back any time. Thanks!

  • Hi Sunil, I’m not 100% sure which slide you are referring to, so I am going to guess what your question is about. If you have a specific churn rate, and a fixed level of bookings, then your business will max out at a certain size where that bookings rate is only enough to cover the churn, but not enough to create any growth. It’s an interesting chart to diagram out, and looks like growth curve that slows and slows and slows, and then finally flat lines.
    If that was not your question, please let me know what slide you were referring to, or perhaps re-phrase the question. Thanks, David

  • Thanks for the kind feedback!

  • sunil*j

    Thanks David, you got it. And sorry, you’re right this wasn’t mentioned in the slides but in one of your related posts ( Ron Gill mentions that churn and the growth rate determine the size of the business, so I was trying to recreate the chart. I ended up slowing ARR growth rate to GDP in the future, and then your point about how the churn rate caps the size of the business becomes clear.

  • Javier Villarreal

    Came across your presentation, David, as I have been building some models for my application. This presentation is excellent and enlightening. Thanks for sharing it to the public.

  • Thanks Javier. Glad to have been of help. Since I had to cram so much material into a short deck, if you ever find yourself wanting more detail, try this blog post as a starting point:

    Best, David

  • @dskok:disqus – thank you for this. quick question: on your slide re. quota being 6x OTE, is that just for ARR or does it also include pro services?

  • Hi David, if I were running a SaaS business, I would want that to be only ARR. The reason why is that for most SaaS companies, services is not a high profit area of the business. So if you do plan to include Services, make sure you are profitable in your services business, and look at the gross margin generated by both the ARR and the services to adjust the ratio upwards accordingly. I hope that makes sense.

  • You da’ man! Thanks David

  • Great work David. Customer churn vs. Dollar churn is interesting. Simply, Companies should focus on enterprise customers more to reduce money churn.
    One quick question: What should be the best subscription plan for net profit/customer? Monthly or Yearly?

  • Do you have any Facebook Account? I want to follow you on there 😛

  • Rohit Jain

    Hi, Why the gross margins in SaaS has to be be 80%, one of our VC’s has asked us. What do i reply him.

  • Hi Rohit, over time as your SaaS business scales beyond about $10-15m in revenue, you should expect to have moved the margins on the SaaS part of your business to between 60 and 90%. The lower number, 60% should apply to companies that have a lot of onboarding and support work to do for their customers (that is included in the Cost of Goods Sold, and therefore affects gross margins). And the higher number, 90% would be for the companies that have very little onboarding and support costs, and not particularly heavy usage of compute and storage resources to support their customers.
    Is this a hard and fast rule? No. But if your margins are worse than 60%, investors are going to view your business as much less attractive than other software investments. (The data above is gleaned from my own experience of looking at many SaaS companies.)
    Note that I did not included professional services in this gross margin calculation, as it is common for some enterprise SaaS companies to also sell professional services along with their software at low gross margins.
    I hope this helps.

    Best, David