Episode 602 | Explaining SaaS Metrics to a Child

Startups For the Rest of Us

Rob Walling

Management, Entrepreneurship, Business, Marketing

4.8 • 792 Ratings

🗓️ 10 May 2022

⏱️ 29 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

In episode 602, Rob Walling explains SaaS metrics to his kid. This is a great episode to listen to if you are unfamiliar or not well-versed in SaaS because we dig into from first principles, starting with dollars, revenue, and the purpose of businesses, all the way to SaaS metrics like MRR, ACV, and LTV. And, even if you are well-versed in SaaS metrics, you’ll likely learn a few things from this conversation. Episode Sponsor: Microsoft for Startups Founder Hub Microsoft for Startups is on a mission to help all founders innovate and grow no matter their background, location, or progress. Microsoft for Startups Founders Hub is a platform that provides founders with free resources to help solve startup challenges, including access to Azure credits, development tools like Github, mentorship resources, Microsoft collaboration and productivity software like Teams and Outlook and more. The program is open to all and takes 5 minutes to sign up, with no funding required. Learn more aka.ms/startupsfortherestofus Topics we cover: [1:55] MicroConf Local London tickets are on sale [3:17] Starting with the basics: money, dollars, and businesses [7:01] Revenue [7:12] Expenses [10:51] SaaS [13:29] Recurring revenue [13:58] Average revenue per account (ARPA) [14:56] Monthly recurring revenue (MRR) [15:08] Average revenue per customer [17:08] Annual contract value (ACV) [18:18] Churn [19:30] Differences between Revenue Churn and Customer Churn [21:18] Lifetime value [22:10] Average customer lifetime value [25:49] Customer Acquisition Cost (CAC) If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you. Subscribe & Review: iTunes | Spotify | Stitcher

Transcript

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0:00.0	You're in the right place if we're looking for another episode of Startups for the rest of us.
0:03.2	This is episode 6002 where I sit down with my 11-year-old and I explain to him not only what
0:10.4	SaaS is, but we start all the way at the beginning with what is money, what are dollars.
0:15.2	And then we talk about businesses and their purpose.
0:17.4	Then we talk about software and then about SaaS.
0:20.1	And then we dive into SaaS metrics, the KPI that you should be tracking, things like
0:25.5	MRR, ACV, LTV.
0:28.3	We go through all the TLAs, you know, the three-letter acronyms.
0:32.1	And I was inspired to do this episode by a quote that's attributed to a bunch of different
0:37.4	people. I think most often,
0:38.6	if you search for this quote, you find it attributed to Einstein. I don't know if he actually said it,
0:41.7	but it basically says, if you can't explain a concept to a child, then you don't understand it
0:46.6	deeply enough. And when I heard that, I thought SaaS metrics are so boring and convoluted and
0:51.9	complex. And what's cool in this episode is actually certain metrics
0:56.5	I say monthly recurring revenue, what does that mean? And then he's able to define it because
1:01.2	the definition is in the three words. But then there are a couple of terms where it's not obvious
1:06.3	what they actually mean. And you can hear him thinking about it because he doesn't speak the jargon like a lot of
1:11.6	us do. And you can hear him struggling to define it. And it shows, I mean, I actually say, yeah,
1:16.9	that's a bad name for this thing, but it's just what is generally acceptable at this point. It's
1:21.0	what most of us use. But anyways, I hope you enjoy this episode. It's very different than a lot of the stuff that I do on the show. But I would say
1:28.4	that if you maybe are unfamiliar or not super versed in SaaS Metrics, this is a good episode for you
1:33.5	because we really do dig in from first principle starting with dollars and then making it all the
	...

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