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Total contracted annual recurring revenue is the single best metric for the health of a business. It encapsulates new logo growth, expansion, and churn in a single number. Shows the money that comes in every year for the life of a subscription (or contract).
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328 reads
Some board members prefer LARR to CARR because it can take a long time to implement a deal. And some never make it.
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Includes $ from new logos booked and expansion net of churn and downsells. This is the best leading indicator of market pull.
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Lately the economics of B2B companies are more driven by expansion than up front ACV (annual contract value). This is the best indicator of that motion.
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Gross retention reflects your churn and downsell and is often an indicator of how mission critical your product is.
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“new logos are oxygen.” They’re the foundation you’ll have to expand in the future.
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Tracking annual contract value of new logos and % growth over time helps you manage your GTM strategy. This is particularly important if you’re trying to move upmarket.
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If you have a couple quarters of sales data, measuring CAC (customer acquisition costs) payback gives you a read on sales efficiency. The typical calculation is (sales + marketing) / (net new ARR x % gross margins). The average startup has a CAC payback of 12-18 mos. If you sell to large enterprises, 18-24 mos; and SMBs, 6-12 mo
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Early sales really takes an entire company, so I’d rather see total burn than trying to break out GTM unit economics. Ultimately, I like to look at cumulative burn and compare it to how many dollars it’s generated
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Pipeline generated in the previous period less pipeline removed (sold or lost) is a good indicator of market pull, and a leading indicator for scaling sales. Generally a bogus number early on, but good discipline to be in the habit of reporting.
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