How the numbers work
SaaS metrics
The subscription health checks investors ask about, and how Foundation works them out.
These appear on the dashboard when at least one product is priced as a subscription.
| Metric | What it tells you | How Foundation works it out | Healthy |
|---|---|---|---|
| ARPU | Average revenue per customer per month | Monthly recurring revenue ÷ average customers | |
| Gross margin | Share of revenue left after the cost of serving customers | (Revenue − variable costs) ÷ revenue | 75 to 85% for software |
| LTV | Gross profit from an average customer over their whole time with you | ARPU × gross margin × customer lifetime in months (1 ÷ monthly churn) | |
| CAC | What it costs to win one new customer | Marketing spend ÷ new customers in year 1 | |
| LTV:CAC | How many times over a customer repays their acquisition cost | LTV ÷ CAC | 3 or more |
| CAC payback | Months of gross profit to earn back the acquisition cost | CAC ÷ (ARPU × gross margin) | Under 12 months for small-business customers |
| Burn multiple | Cash burned for each unit of new recurring revenue | Net cash burned ÷ net new annual recurring revenue | Under 1 excellent, 1 to 2 fine |
| Rule of 40 | Balance of growth and profit | Revenue growth % + profit margin % | 40 or more |
| Runway | How long the money lasts | Peak funding needed ÷ monthly cash burn |
Things to know
- Churn is the yearly rate from Financial Assumptions. A 3% monthly churn is about 31% a year.
- Foundation doesn't separate the cost of serving customers from other variable costs, so gross margin uses all variable costs. Mark hosting and support as variable on Cost Structure for a fair figure.
- Runway uses your peak funding need, because a business that hasn't launched has no bank balance yet.