This page summarizes the most popular articles and blog posts on this site covering SaaS (Software as a Service), and recurring revenue topics. In addition to these articles, make sure to check out the 9 Step Startup Roadmap, which is highly relevant to SaaS companies.
SaaS Metrics 2.0
The most important article is SaaS Metrics 2.0, which appeared early in the evolution of the SaaS space and instantly became one of the definitive resources on SaaS. It addressed many questions that both entrepreneurs and investors had about how to understand their SaaS business, and which metrics would have the greatest impact on success. It remains as relevant today as it was when it was first published and has many thousands of views every month.
Traditional accounting metrics like Bookings and those found in the Income Statement and Balance Sheet aren’t useful for judging the health of SaaS and recurring revenue businesses. This blog post defines the metrics that are useful, and provides a sample Dashboard for management to track their SaaS business. The post led to almost universal adoption of the use of LTV:CAC and Months to recover CAC as crucial metrics to evaluate the long term profitability of a SaaS business.
SaaS Metrics Videos
Here are two short videos where I cover the highlights of SaaS Metrics:
SaaS Economics and the SaaS Cash Flow Trough
The following two posts: SaaS Economics 1 and 2, look into the unit economics for a sales person, showing how long it takes to breakeven on the investment of hiring a new sales rep (hint: you lose money for some period of time before the rep starts to payback on the investment). After that starting point, the article introduces an Excel spreadsheet model that models the impact of hiring more sales reps, and looks at what happens if you hire faster or slower. The result shows why SaaS startups experience a cash flow trough that is deeper if they decide to grow faster, but also one where the return to profitability is more dramatically positive if you hired faster. The included Excel model lends itself to you being able to play with your own data.
