1- Revenue growth: the T2D3 framework - Deepstash
1- Revenue growth: the T2D3 framework

1- Revenue growth: the T2D3 framework

Some companies find their PM fit faster than others. The T2D3 framework shows what it takes to grow your revenue from $1M — $2M to around $100M Arr in 6–7 years. The vast majority of Saas startups will never reach this level of growth and that’s completely fine. If you talk to “traditional” Saas Vcs, they’ll probably ask themselves: “does this company have the potential to T2D3?””

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MORE IDEAS FROM 6 SaaS Metric Frameworks & Benchmarks To Know Before Fundraising

2- Revenue Growth efficiency: SaaS Quick Ratio

High Churn and lack of account expansion can kill even the fastest growing companies.

This is where the SaaS Quick Ratio comes in handy.

SaaS Quick Ratio = (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)

 A Saas quick ratio superior to 4 will excite Vcs, between 2 and 4 a bit less but still OK.

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3- The LTV / CAC ratio

Ltv stands for lifetime value and Cac stands for the customer acquisition cost. VCs expect that a customer generates at least 3 times what it cost you to acquire him (it’s a minimum).

This ratio mixes many aspects from sales and marketing efficiency to your ability to keep users (linked to product quality and customer support). As a consequence, there are many ways to optimize this ratio and just looking at the “raw result” won’t give you many insights.

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4- Churn Benchmark

Churn is one of the most coveted and analyzed SaaS metrics on the internet so I won’t go into details here but just share this table by Tomasz Tunguz: 

You can probably be even more demanding for the Enterprise segment and expect a 0–0.5% monthly customer churn (and you generally measure Enterprise churn on a yearly basis rather than monthly).

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5- The 40% Rule

The 40% rule is that your growth rate + your profit should add up to 40%. So, if you are growing at 20%, you should be generating a profit of 20%. If you are growing at 40%, you should be generating a 0% profit. If you are growing at 50%, you can lose 10%. If you are doing better than the 40% rule, that’s awesome.

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North Star

What's a Good or Bad North Star? 

• Bad: Mostly measuring price paid as opposed to value delivered • MRR, paid seats

 • Good: Measures value delivered in bulk • MAU, DAU, messages sent

 • Better: Unquestionably indicates Product-Market fit has been reached with the customer • Number of users with L28>=16 • Messages sent w/in 30 days of signup.

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RELATED IDEA

Defined as the percentage of customers that cancel their subscriptions in any given time period, churn rate is an essential metric that can make, or break, the success of your SaaS business.  

That's why it's so critical to master churn analysis. No SaaS company can hang on to all its customers forever. But by understanding the nuances of why your customers churn, you can find more effective ways to reduce it.

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Analysing Churn: A comprehensive Study

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Churn can most basically be defined as resources lost in a given period of time. Typically it’s referring to users or revenue lost and is usually represented with either a percentage or dollar amount.

For example, if you had a 5% monthly user churn rate, that means each month 5% of your customer base is cancelling.

Or if you said you had $2,000 in monthly revenue churn, that means you lost $2,000 in monthly recurring revenue from either customer cancellations or downgrades.

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In this guide, we’re going to go over six strategies to reduce churn, with real-life examples from SaaS companies that have successfully done it.

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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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