Growth & Efficiency

The Rule of 40 states that a healthy SaaS company should have a combined growth rate and profitability margin that adds up to at least 40%.

Revenue per Headcount is a simple measure of how much revenue each employee generates for a company.

Magic Number is a ratio that measures the relationship between the increase in ARR and the sales and marketing expenses incurred to achieve that growth.

FCF Margin measures the percentage of revenue a company generates as free cash flow, expressing the company’s ability to convert its sales into cash after covering OpEx and CapEx.

According to the efficiency rule, a healthy SaaS company will have a positive ratio of net new ARR to cash burn.

CAC Payback indicates how long it will take for a company to recover the investment made in acquiring a customer through the revenue generated from that customer.

CAC represents the average cost a company incurs to acquire a new customer, including the expenses associated with marketing, advertising, sales, and other activities aimed at acquiring customers within a specific time frame.

ARR Growth is a key performance indicator that measures the percentage increase in a company’s recurring revenue over a specific period, usually on an annual basis.