Healthcare Software & Data Knowledge Portal
Understanding key operating metrics from world class software and data companies is helpful in benchmarking your company’s performance. Ardan has compiled key operating levers at time of IPO for a basket of nine top cloud companies including gross margin, sales & marketing (% of sales), R&D (% of sales), and operating margin (% of sales).
Customer Lifetime Value (CLTV) is the revenue or margin that you receive from one customer over the lifetime of that customer. The term “Customer Lifetime Value” is known by many words. It’s also known as Lifetime Value (LTV) or CLTV.
The rule of 40 in SaaS is simple financial framework that balances revenue growth versus margins. It’s a rule of thumb to quickly determine the health and/or attractiveness of a SaaS company.
Customer Acquisition Costs (CAC) is a key metric to understand for any SaaS (software-as-a-service) or subscription-based business. In isolation, it does not mean much, but used in conjunction with CLTV (customer lifetime value), ARR (Annual Recurring Revenue), CAC/LTV ratio, and ACS (Average Cost of Service), it is a powerful metric.
The SaaS Magic Number is a widely used formula to measure sales efficiency. It measures the output of a year’s worth of revenue growth for every dollar spent on sales and marketing. To think of it another way, for every dollar in S&M spend, how many dollars of ARR do you create.
Selling a new customer is only half the battle. Measuring and managing your customer churn and retention is key to creating a sustainable business. This helps a company understand the right balance between sales/marketing spend, customer success teams and potential product feature driven leakage.