The Metrics Brothers

How the Enterprise Value of a SaaS company impacted by growth rate is the topic of today's conversation with Dave "CAC" Kellogg and Ray "Growth" Rike - the result is a new metric named "ERG" - the Enterprise Value to Revenue to Growth Rate Multiple.

During this episode, Dave and Ray highlight several leading public, B2B Cloud companies and how their Enterprise Value to Revenue multiples are impacted when the growth rate is factored in.

With a public Cloud/SaaS company median growth rate of 21%, the median Enterprise Value to Revenue multiple of 6.1x and a median ERG of .31 - what does that mean when the ERG is calculated for public Cloud companies such as Workday, Twilio, Domo, ZoomInfo and Hubspot?

If you are interested in how growth rate impacts enterprise value in a B2B Cloud company - this episode is a great listen!

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Dave "CAC" Kellogg and Ray "Growth" Rike go out on a limb and share their predictions on the Top 5 SaaS Metrics in 2024 - some are old friends and two are brand new for 2024!!!

2023 was a year focused on efficient growth, extending cash runways and making progress towards profitability. Simultaneously, certain metrics became more important in correlation to enterprise value to revenue multiples - including the re-emergence of the Rule of 40 being critical to company valuations.

Which metrics are Dave and Ray predicting as the Top Five for 2024:

• Rule of X - a growth-weighted Rule of 40
• ARR/FTE - the ultimate overall productivity metric for B2B SaaS companies
• GRR & NRR - Why the "&" is so important to measuring retention & expansion
• CAC Payback Period and CAC Ratio - The GTM efficiency metric combination
• ERG - a growth-weighted enterprise value to revenue growth ratio

The Metrics Brothers focused on the "SaaS Metrics" predictions for this episode - but if you would like to see the more holistic 2024 predictions - take a look at Dave's @kellblog post at: https://kellblog.com/2024/01/02/kellblog-predictions-for-2024/

Happy New Year to all and here is to an improving B2B SaaS environment with a balanced approach to growth and profitability!!!

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Dave "CAC" Kellogg and Ray "Growth" Rike discuss the long standing, industry standard SaaS Metrics Benchmark report from KeyBanc Capital Markets, which was released in December, 2023.

If you are a long-time SaaS veteran or new to the SaaS industry - this report has been the de facto SaaS Metrics benchmarking report for 14 years. This year's report includes a total population of 106 companies, and often comes up short in comparison to previous year's report. The small population makes segmenting the benchmarks by company size or ACV much very difficult - and benchmarks that are relevant to company size and ACV is critical in making them useful.

We encourage our listeners to download the report and follow along at CAC and Growth break it, and several of the metrics that are included... which are primarily for 2022, and some are based upon 2023 estimates.

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Dave "CAC" Kellogg and Ray "Growth" Rike continue their break down the recent Battery Ventures - State of the OpenCloud 2023 Report which includes a historic view of performance benchmarks and some predictions on how AI will impact performance metrics in the future.

During Part 2 of this episode the co-hosts cover several metrics and SaaS industry trends including:

• Growth Rates
• Technology Buyer Sentiment heading into 2024
• The impact of balanced growth + profitability
• Business model and pricing evolution
• Stock Option Re-pricing
• The human capital impact of AI...beware Sales and Marketing

The entire report is available by clicking here.

See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Dave "CAC" Kellogg and Ray "Growth" Rike break down the recent Battery Ventures - State of the OpenCloud 2023 Report which includes a historic view of performance benchmarks and some predictions on how AI will impact performance metrics in the future.

During this episode the co-hosts cover several metrics and SaaS industry trends including:

• Growth Rates
• Technology Buyer Sentiment heading into 2024
• The impact of balanced growth + profitability
• Business model and pricing evolution
• Stock Option Re-pricing
• The human capital impact of AI...beware Sales and Marketing

The entire report is available by clicking here.

See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Dave "CAC" Kellogg and Ray "Growth" Rike analyze the recently published OpenView Partners 2023 Benchmark Report which was conducted in partnership with Paddle. Interesting insights into the declining growth rates and increased customer churn trends.

Key metrics and the associated benchmarks segmented by company ARR analyzed include:

• Growth Rate
• Rule of 40
• Net Revenue Retention
• Gross Revenue Retention
• CAC Payback Period
• Headcount
• Revenue/FTE

The OpenView 2023 Benchmark Report is at: openviewpartners.com/2023-saas-benchmarks-report/

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Rule of 40 is a long standing metric used by investors to determine the health and enterprise value of a SaaS company, that is misunderstood far too often - so CAC and Growth dedicated an episode to how the Rule of 40 is calculated and how it impact company valuations including:

• Calculation formula
• Best variable for the operating profitability component
• Balance of growth and profitability yielding the highest valuation multiples
• When does the Rule of 40 become valuable versus a vanity metric

If you are a SaaS operator or a public SaaS company investor, this episode covers and important topic and is a great listen!

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Presenting performance metrics at a board meeting is a critical skill for every SaaS CEO, CFO and executive team member - Dave "CAC" Kellogg and Ray "Growth" Rike share a few best practices during this episode including:

• First slide provides a holistic executive summary
• Second slide establishes the foundation for every other slide
• The importance of showing trends and establishing context
• Mistakes to avoid

This episode encapsulates much of the content from two different presentations shared at SaaStr annual 23' and SaaS Metrics Palooza 23'

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SaaS metric benchmark trends over the last decade highlights the challenges associated with the rapid expansion and evolution of the B2B SaaS industry. Some of the significant changes that every SaaS industry stakeholder should understand include:

• Expansion as a % of Revenue Growth
• Gross Churn Rate
• Net Revenue Rate
• Customer Acquisition Cost Ratio (cost of acquiring a $ of Growth ARR - New and Expansion)
• Rule of 40
• ARR per FTE

Matt Harney - at Cloud Ratings did a great job at putting this report together and we highly recommend everyone take a look at: cloudratings.com/saas-benchmarks-historical/ to follow along with Dave "CAC" Kellogg and Ray "Growth" Rike as they break down the top findings and insights from this SaaS Metrics Benchmarks longitudinal report.

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Dave "CAC" Kellogg and Ray "Growth" Rike discuss all things Bookings, Total Contract Value, Annual Contract Value, Billings and revenue including:

• Bookings vs Total Contract Value vs Annual Contract Value
• Billings - more than an invoice?
• Revenue - CARR, ARR and GAAP

B2B SaaS companies regularly use the above terms, but unfortunately not always consistently defined, calculated and/or utilized.

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