CARR

CARR

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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11 Key GTM Metrics for B2B Startups

a16z.com

MORE IDEAS FROM THE ARTICLE

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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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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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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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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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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“new logos are oxygen.” They’re the foundation you’ll have to expand in the future.

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Teams > Individuals in SaaS businesses

SaaS companies make disproportionately more money with Team plans:

  1. Deal Sizes are bigger
  2. Retention is so much better. Once a team is collaborating in a product, no single user can easily make the decision to leave
  3. Seat Expansion. Successful Team products have “net negative churn,” meaning that expansion from retained accounts exceeds revenue lost from churned accounts.

Individual plans are the definition of a Leaky Bucket, with usual yearly churn rates of 50%. The Individual plan makes sense for enabling sharing and collaboration as soon as you can. But Teams are the ultimate destination.

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Individuals or Teams: Who’s the Better Customer for SaaS Products?

sacks.substack.com

The Business Model

A business model refers to a company's plan for making a profit.

  • It identifies the product or service
  • The target market
  • Anticipated expenses

A business model helps developing companies to attract investment, recruit talent, and motivate management and staff. Established businesses should regularly update their business plans to help anticipate trends and challenges ahead.

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Business Model Definition

investopedia.com

The "Consumerization" of Enterprise

Slack, Dropbox or Zoom have applied specific strategies to win customers – tactics that resemble those of consumer companies rather than enterprise firms.

The go-to-market playbook for early-stage B2B founders:

  • Taking a consumer approach to enterprise
  • Product positioning through category-creation
  • Generating repeatable and non-associated revenue (e.g. “crossing the penny gap”)
  • Building a strong sales organization

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How David Sacks built the first bottom-up playbook for enterprise

wfh.substack.com