If you're valuing SaaS companies like traditional ones, think again. You're probably missing key metrics. Here are the essentials you should focus on: - ARR (Annual Recurring Revenue): The lifeblood of SaaS, showing predictable income. - Churn Rate: High churn can sink future revenues. - Customer Acquisition Cost (CAC): Knowing this helps balance spending and growth. - Lifetime Value (LTV): This tells you how much revenue a customer will bring over time. Traditional businesses don't operate on these dynamics. SaaS companies scale fast and pivot quickly. By ignoring these metrics, you risk undervaluing potential gems. So, update your valuation toolkit. Agree or disagree? #BrainDumps | BrainDump #107
My professional background is in business development and sales, and I have been on the customer side of SaaS companies. The high churn rate is a hot point that I question if SaaS companies are paying adequate attention. Reducing customer churn involves a multi-prong strategy of adequate customer onboarding, a proactive plan of customer engagement, delivering consistent value, a swift process of acting on customer feedback, leveraging data analytics to identify at-risk customers, offering tailored solutions, assigning dedicated account managers, and providing loyalty incentives. Regardless if a company is SaaS or other, treat your customers like they are the only ones you will ever have and give them the attention they deserve.
Agree completely. LTV & Churn are especially important to understand the longterm prospect of a SaaS. Even if its doing well now, with low user value and a high burn rate odds are its short lived.
And to extend: if you’re valuing AI-native companies like SaaS ones, think again. Companies like ours replace whole workflows so the multiple are very different. NFX wrote a nice article on the Verticalization of Everything. https://www.nfx.com/post/verticalization-of-everything
Chris Tottman Great insights! These metrics are essential to unlocking the real potential of SaaS businesses.
Definitely a game-changer! Traditional valuation methods miss the key dynamics of SaaS growth. Chris Tottman
Josue Valles
3w
SaaS companies that don't accommodate their metrics to their needs are condemning themselves to failure.
SaaS metrics flip traditional valuation on its head. ARR and LTV are the game-changers. If you’re not factoring in churn, you’re not valuing sustainability. The pivot potential in SaaS is unreal. Totally agree.
Ala Uddin
3w
SaaS companies are like superheroes with special metrics! It's fun to see how they grow so fast with tools like ARR and churn rates. Keep these in your toolkit, and you'll find some real treasures!
If you’re valuing SaaS companies like traditional ones, you’re probably missing some key stuff that really matters.
GP @ Wally Capital | #1 Bestselling author of product building | Investor and producer of The Price Is Right | Trevor Milton's twin brother
3wChris Tottman it’s a high-stakes poker game where ARR is the pot, churn rate is the bluff, and LTV is the ace up your sleeve