The Metrics Brothers

Marketing budget and productivity benchmarks are hard to find, so when Dave "CAC" Kellogg and Ray "Growth" Rike first saw the ICONIQ Growth Marketing Budget and Productivity Report - they knew it was a great topic for this episode of SaaS Talk with the Metrics Brothers.

During today's episode, Dave and Ray discuss several critical Marketing Planning, Budget, and Productivity benchmarks including:

• Marketing budget as a percentage of Revenue
• On-line versus off-line spend
• Program vs People budget allocation
• Online Marketing spend by channel
• Off-line Marketing spend by program
• Outsourcing and Agency spend by program type
• Marketing efficiency benchmarks
• Pipeline contribution sources

If you are a B2B SaaS Chief Marketing Officer, Chief Financial Officer or CEO, this episode is chalked full of great data, insights and ideas for 2025 and beyond...

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ServiceTitan, a vertical SaaS company for the trades recently filed their S-1 and went public on December 12, 2024. Dave "CAC" Kellogg and Ray "Growth" Rike discuss many details regarding the S-1 including the basic enterprise value creating performance metrics and some very interesting aspects of the IPO structure.

During this episode, Dave and Ray discuss several aspects of the S-1 and IPO measured against industry benchmarks including:

• ARR Growth Rate
• Rule of 40
• Net Dollar Retention Rate
• CAC Payback Period
• Gross Margin
• S&M as a percentage of revenue
• R&D as a percentage of revenue
• ARR per FTE
• Revenue breakdown by category (Subscription, Gross Transaction Value, Services)
• Down round from last rounds of funding as a private company
• Compounding IPO Ratchet
• Different classes of stock and voting rights

One of the sources of information used for this episode was the Meritech Capital S-1 breakdown which can be read here.

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KeyBanc Capital Markets in partnership with Sapphire Ventures recently published their 2024 SaaS Metrics Benchmark report. During today's episode, Dave "CAC" Kellogg and Ray "Growth" Rike dive into this years highlights including:

• Growth Rates
• Net and Gross Revenue Retention
• Rule of 40
• Go-to-Market Organization Ratios
• Marketing Strategies and Productivity
• Human Capital Efficiency
• Valuation Multiples - By Growth Rate

If you are a SaaS executive, employee or investor this episode is a great listen!

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The Sales Operations function evolves dramatically as a company scales and Meghan Gill, SVP Sales Ops and Sales Development at MongoDB has lived that reality. Meghan started in Marketing at MongoDB as employee number 8 as the first non engineering hire, and then seven years later took over Sales Operations in preparation for their IPO.

CAC and Growth discuss the evolution of Sales Ops with Meghan and discuss several key topics including:

• The career journey from Marketing to Sales Operations
• The evolution of Sales Operations post IPO
• Sales Operations vs Revenue Operations
• GTM changes required when converting to Usage-Based Pricing
• Centralized planning to decentralized global planning - an operations perspective

Hearing how the role of Sales Operations evolves from pre IPO to post IPO and continuing to $2B+ directly from a person who has been in the middle of making that journey possible makes for a highly informative conversation and a unique guest centric SaaS Talk with the Metrics Brothers episode!!!

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CAC and Growth discuss the recent Scaling SaaS from $1M to $20M ARR ICONIQ Growth report that provides a long term view on the performance metrics benchmarks that SaaS companies exhibit at granular stages of growth including $5M, $10M, $15M and $20M ARR.

Benchmarks covered include:

• Enterprise Five Benchmarks (Median and Top Quartile)
• Growth Plateau Challenges started at $25M ARR
• New Logo Growth
• Operating Expense Trends
• Annual Contract Value Growth by Stage
• New ARR vs Expansion ARR
• ARR per FTE
• Burn Multiple

The ICONIQ Growth "Scaling SaaS from $1M to $20M ARR" Report provides unique insights and perspectives on the benchmarks that define success as measured by both the top quartile and median benchmarks for the 107 private SaaS companies that are included in this research.

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The Remaining Performance Obligation (RPO) metric has become a more standard metric that public company Wall Street analysts have started to follow closely to help evaluate the bookings growth of recurring revenue companies. CAC and Growth cover the following topics regarding RPO including:

• Why was the Remaining Performance Obligation created
• What does the Remaining Performance Obligation (RPO) metric tell investors
• How is RPO calculated
• The difference between RPO and deferred revenue
• How multi-year agreements impact both the RPO and Deferred Revenue calculations

If you are interested in how public company analysts use the RPO metric or are just a student of the SaaS industry - this episode dives deep into an increasingly important SaaS investor metric!

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Customer Retention is a hallmark of the SaaS recurring revenue business model. But what is the primary metric to measure the cost of retaining each customer, how is the efficiency to renew ARR calculated, and what goes into that metric?

Dave "CAC" Kellogg and Ray "Growth" Rike go deep into the components of Customer Retention Costs and the value in measuring including:

• The benefits of measuring Customer Retention Costs
• Customer Retention vs Customer Renewal Costs
• The Components of Customer Retention Costs
• Total ARR or Renewed ARR - which is the best to measure Retention Costs against

The SaaS industry has multiple metrics that measure the cost to acquire a customer (Customer Acquisition Cost), the efficiency of acquiring new customers (CAC Ratio), the payback period on Customer Acquisition Costs (CAC Payback Period) and how much recurring revenue is retained every period (Gross Revenue Retention- GRR)...but no standard metric that measures the efficiency of retaining and renewing customers.

During this episode, CAC and Growth dive deep into the topic of the Customer Retention Cost Ratio and the Customer Renewal Cost Ratio!

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New investment announcements in B2B SaaS companies are not quite what they seem!? Over the past few years, public announcements have moved from how much capital was raised to what the valuation of the company was at funding. BEWARE - those valuation headlines are full of nuance and details that are not disclosed!!!

Dave "CAC" Kellogg and Ray "Growth" Rike - also known as The Metrics Brothers go deep into the details that are left out and are present behind the headline valuation announcements including:

• Class of stock
• Liquidation preferences
• Participating preferences
• Redemption Rights
• Secondary Sales

If you are in the B2B SaaS industry and interested in the "story behind headline valuation announcements" - this is a great conversation to hear!!!

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Contracted Annual Recurring Revenue (CARR) and Annual Recurring Revenue (ARR) are commonly used terms in the SaaS and Cloud Industry but are not standardized leading to inconsistent calculation. In fact, they were the first two metrics the SaaS Metrics Standards Board published standards upon.

Dave and Ray discuss the current definitions, calculations and how Usage-Based Pricing is impacting the historic ARR reporting model.

During today's episode CAC and Growth cover the following topics:

• Contracted Annual Recurring Revenue (CARR) - Definition and Calculation
• Annual Recurring Revenue (ARR) - Definition and Calculation
• Usage-Based Pricing and impact on revenue reporting
• Introduction of Recurring and Re-ocurring revenue
• Reporting variable revenue from Usage-Based Pricing models

With ARR not being a FASB / GAAP Revenue reporting standard - the opportunity and challenges for having multiple calculation and reporting models is easy to identify - but hard to rectify.

If you are using, considering using or do not use Usage-Based Pricing this conversation and episode is a great listen.

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Free Cash Flow is a key metric for any SaaS investor and thus for SaaS CFOs and CEOs. Moreover Free Cash Flow Margin is a key variable in the Rule of 40 - a key enterprise value creation metric. Dave "CAC" Kellogg and Ray "Growth" Rike dive deep into the value behind the FCF metric and the different ways to calculate!

During this episode Dave and Ray discuss the following elements of Free Cash Flow:

• Where to find Free Cash Flow on public company filings
• The three primary Cash Flow statements
• Different formulas to calculate Free Cash Flow
• The impact of capitalizing sales commissions and R&D
• The Rule of 40 calculation - Free Cash Flow as the profitability metric

Free Cash Flow is not a metric limited to B2B SaaS companies but has become an increasingly important metric to SaaS investors as the industry matures as measured by how Enterprise Value has become more correlated to a blend of growth and profitability.

This episode is a great listen for anyone interested in the core financial metrics that impact the value of a B2B SaaS company!

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