SaaS Business Foundations

✈️ Running Your SaaS Business Without Metrics? Imagine stepping onto that flight and you look left...no instruments—no altimeter, no compass, no navigation tools. Nervous? You should be. Running a SaaS company without metrics is just as risky. Metrics are your cockpit instruments, giving you the clarity to: ✅ Navigate growth opportunities ✅ Spot and fix problems before they escalate and burn cash ✅ Stay on course toward your goals 🎯 I developed the Five Pillar SaaS Metrics Framework, a system that gives SaaS teams and leaders the transparency and tools to scale confidently. Here’s How It Works: 🔹 Growth Metrics - Are you tracking ARR, expansion, and customer acquisition effectively? 🔹 Retention Metrics - Are customers renewing, and are they satisfied? Retention drives SaaS success. 🔹 Gross Margins - Is your delivery engine efficient and scalable? 🔹 Financial Profile - Are you balancing growth with profitability? (Hint: check your Rule of 40.) Hard to get out of that EBITDA negative hole. 🔹 Sales/Org Efficiency - Are your GTM investments delivering ROI? How about your team’s efficiency? Why Should We Care? Whether you’re in sales, marketing, product, or customer success, metrics impact your day-to-day decisions. Metrics help teams align, prioritize resources, and pivot when needed. They also show investors, leadership, and YOU what’s working and what isn’t. 💡 Takeaway: Be the co-pilot in your company’s journey. Know your metrics. Ready to dig into the framework? Check out the link below. #SaaS

Early in my VC career, I was burned several times by “over-qualified” CFOs who liked to talk strategy and M&A but could not generate accurate financials. So for many years, I advised spending very little on finance, just enough to keep the books in order. My views have changed, however. For SaaS businesses with small to mid-sized customers who are booking 20 or more customers a year, a well-functioning finance department is critical right out of the gate. Why? Because finance is where data resides, and data is the lifeblood of a SaaS company. But why should the data live with finance? Why not in marketing or sales? It’s because the finance function has an inherent level of checks and balances. Financial statements are designed to balance and are tied back to the reality of the bank account. They can be manipulated, but not for long. I have worked with many SaaS businesses that kept track of things like ARR and bookings in other systems or spreadsheets, and they were inevitably wrong. ARR and bookings must be reconciled with billings and cash, which only happens in finance. This is not to imply that other systems or departments are sloppy or untrustworthy; it’s just that they are not designed to be balanced, and they can’t tie their numbers to anything real, like a bank account. But what can finance do with the data that creates value for a start-up? A capable finance department generates financial statements and metrics that allow the executive team to make smarter decisions about managing the company. That sounds simple, but in practice, most start-ups do not have good financial statements and metrics to help guide their decisions. Let’s start with something as simple as the “chart of accounts.” The chart of accounts is a list of labels you use to categorize the money flowing through your company. If you use the labels pre-populated into QuickBooks, you will use the same labels as an ice cream shop and a tattoo parlor. Do yourself a favor and start with a chart of accounts designed for a SaaS company. How will this be an advantage? Let’s look at a company's income statement with a SaaS-specific chart of accounts vs. one without. This is basic, but it’s obvious how the presentation on the left provides more insight into the business. In addition, the income statement on the left allows critical SaaS metrics like CAC Payback and others to be calculated and tracked. And these benefits are not just internal; they apply directly to fundraising and M&A. SaaS investors and buyers understand and expect the financial presentation on the left. At SaaS Capital, we would have to work with companies to create a more detailed income statement if they did not already have one. This slowed the process and, in some cases, stopped us from providing capital. In the comments section below is a link to a more expansive discussion of the strategic importance of the finance function in a start-up.

𝗛𝗼𝘄 𝘁𝗼 𝗦𝗰𝗮𝗹𝗲 𝗬𝗼𝘂𝗿 𝗦𝗮𝗮𝗦 𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗳𝗿𝗼𝗺 $𝟬 𝘁𝗼 $𝟭𝟬𝗠 𝗔𝗥𝗥 (𝗪𝗶𝘁𝗵𝗼𝘂𝘁 𝘁𝗵𝗲 𝗠𝗶𝘀𝘁𝗮𝗸𝗲𝘀 𝗧𝗵𝗮𝘁 𝗞𝗶𝗹𝗹 𝟵𝟮% 𝗼𝗳 𝗦𝘁𝗮𝗿𝘁𝘂𝗽𝘀) I just spent 6 months analyzing what separates SaaS winners from the graveyard of failed startups. The findings? Brutal. 92% fail not because of bad products—but because they scale the wrong things at the wrong time. 𝗛𝗲𝗿𝗲'𝘀 𝘁𝗵𝗲 𝗳𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸 𝘁𝗵𝗲 𝟴% 𝘂𝘀𝗲 𝗶𝗻𝘀𝘁𝗲𝗮𝗱: → 𝗦𝘁𝗮𝗴𝗲 𝟭: 𝗙𝗼𝘂𝗻𝗱𝗮𝘁𝗶𝗼𝗻 ($0-$100K ARR) Skip the vanity metrics. Focus on ONE thing: Product-market fit signals. NPS above 50? Check. Monthly churn below 5%? Check. THEN you're ready for Stage 2. → 𝗦𝘁𝗮𝗴𝗲 𝟮: 𝗚𝗿𝗼𝘄𝘁𝗵 𝗘𝗻𝗴𝗶𝗻𝗲 ($100K-$1M ARR) Now you systematize everything. Sales playbooks that work without you. Customer success that prevents churn. Marketing channels with predictable ROI. → 𝗦𝘁𝗮𝗴𝗲 𝟯: 𝗦𝗰𝗮𝗹𝗶𝗻𝗴 𝗦𝘆𝘀𝘁𝗲𝗺𝘀($1M-$10M ARR) This is where most founders break. They try to hire their way out of broken processes. Wrong move. Build systems first, then hire. → 𝗦𝘁𝗮𝗴𝗲 𝟰: 𝗠𝗮𝗿𝗸𝗲𝘁 𝗘𝘅𝗽𝗮𝗻𝘀𝗶𝗼𝗻($10M+ ARR) Only expand when you dominate your core market. New geographies, customer segments, product lines. But never before you own your initial space. The counterintuitive truth? Slow down to speed up. I've seen $100M+ SaaS companies that still use this exact progression. Because scaling isn't about growth rate—it's about sustainable unit economics, customer lifetime value, and building systems that don't break when you pour gasoline on them. The most dangerous phrase in SaaS? "We need to scale faster." The most profitable phrase? "We need to scale smarter." Every SaaS founder should bookmark this framework. I just published the complete 3,500-word deep-dive covering all 5 stages, including: → 10 scaling mistakes that kill growth → FAQ section for common scaling questions → Unit economics benchmarks for each stage → Coaching questions to assess your readiness 𝗗𝗠 𝗺𝗲: Which stage is your SaaS currently in? Drop me a DM and I'll share the specific metrics you should be tracking. No selling or pitch. Just added value and identify any SaaS blind spots. 𝗣.𝗦.- This isn't theory. These insights come from coaching 100+ SaaS founders and seeing what actually works at scale. The article includes 18 authority sources from McKinsey, HBR, Salesforce, and other industry leaders. #SaaS #SaaSGrowth #SaaSScaling #Entrepreneurship #StartupGrowth #SaaSFounders #ScaleUp #SaaSStrategy #RecurringRevenue #ProductMarketFit #SaaSMetrics #B2BSaaS #GrowthStrategy #SaaSCoaching #StartupAdvice

I sold my company for $169M back in 2012. Founders, here’s what acquirers are looking for in 2025👇 When we exited iContact, the market rewarded revenue growth and brand strength. Multiples were driven more by story than structure. In 2025, that’s no longer the case. After working with hundreds of SaaS founders inside SaasRise, I can tell you this: Acquirers today are prioritizing companies that run clean, repeatable, capital-efficient businesses. Here’s what’s actually getting deals done: 1️⃣ Predictable unit economics > top-line hype 2025 acquirers are digging deep into the efficiency layer. Not just “how much did you grow?” but “what did it cost you to grow?” They’re looking for: • LTV/CAC over 4:1 • CAC payback under 12 months • Net revenue retention above 110% annually • Rule of 40 or higher (Rev growth + Profit %) ↳ Burning capital without a proven growth engine is no longer impressive - it’s a red flag. 2️⃣ Capital efficiency and founder ownership Exits don’t change lives when the cap table is upside down. Founders who’ve raised heavily often find themselves with little to nothing left at exit. What gets rewarded now: - Raising no more than 1x ARR - Founders having enough equity - A clean structure with no complex preference stacks ↳ Acquirers want to partner with founders who still have skin in the game. 3️⃣ A working GTM engine & not one-off wins You can’t fake repeatability. Buyers want proof that revenue isn’t built on founder hustle or one lucky deal. What they want to see: • Clear ICP + messaging that lands • Predictable pipeline from scalable sources • A sales team (not just you) closing consistently ↳ Your revenue motion should run without you. 4️⃣ Customer depth, not just logos Big logos don’t close deals in 2025. Buyers are digging into the "quality" of your customer relationships. They care about: - High-value, sticky accounts - Low churn and strong expansion - Efficient customer success teams ↳ Depth beats width every time. 5️⃣ Businesses that don’t depend on capital Even if you’ve raised, acquirers want to know you didn’t have to. They’ll be asking: • What’s your monthly burn? • Could you hit break-even if needed? • Are you growing by choice or by necessity? ↳ Think like a bootstrapped business, even if you’re not. The path to a great acquisition today isn’t speed. It’s durability. ✓ Durable GTM. ✓ Durable culture. ✓ Durable cash flow. If you want options in 2025, focus on building something a buyer wants to own, not just something you want to sell. Founders inside SaasRise are already doing this work. We’re not playing the funding game. We’re playing the value game. —-------- Today, I run SaasRise, helping other SaaS founders with $1M-$100M ARR scale and exit. If you’re struggling to scale your SaaS business to $100M, do check out SaasRise from the link in the comments 👇

SaaS companies are losing millions by tracking vanity metrics Instead of the 6 numbers investors actually care about. I've worked with 100+ fast growing companies as a fractional CFO And partnered with Maxio to create the ultimate SaaS metrics guide. You can download it for free. Most founders obsess over revenue while missing the metrics investors actually care about. They can't answer basic questions about churn, CAC payback, or NDR. So Maxio and I teamed up to fix that. → What's inside the Guide: – How to build a clean ARR/MRR foundation – Calculate CAC the right way (what to include/exclude) – Connect ACV, NDR, and LTV to spot pricing issues early – Use NDR to diagnose sustainable growth – Replace spreadsheet chaos with automated dashboards Between my work with SaaS companies and Maxio's experience powering metrics for thousands of subscription businesses, we kept seeing the same gaps. Finance teams spending days building reports manually. Founders presenting incomplete metrics to investors. CFOs unable to explain unit economics. This guide fixes all of that. Download it here: https://lnkd.in/euY8rmJY

For Enterprise SaaS startups, the transition from early-stage to the growth is where the real challenges begin. The key is building a financial operating model that balances ambition with sustainability and ensures the company is prepared for the road ahead. I think about planning in 3 scenarios, and each scenario has its own cash requirements: 1. The "baseplan" to achieving cashflow positive Becoming cashflow positive makes your company "default alive," giving you the freedom to operate without being at the mercy of external funding. 2: Doubling ARR for Two Consecutive Years This is where things get exciting—and risky. Sustaining 2x ARR growth for two years requires a laser focus on scaling efficiently 3: Sustaining 2x ARR Growth for Three Consecutive Years This is the dream scenario—hypergrowth sustained over the long term. But it comes with significant challenges in scaling operations & internal processes, sales efficiency, maintaining high gross margins, etc The Big Takeaway The foundation of any growth strategy is ensuring that your company is default alive by achieving cashflow positivity. From there, you can layer in more aggressive growth scenarios via a "beat and raise" mindset. As you beat your revenue targets, you reinvest that additional cash into growth initiatives that create more opportunities to beat your next revenue target Scaling doesn’t just mean spending more—it’s about making strategic choices to fund your growth. There are a spectrum of options for funding and some combination gets you the cash needed for each scenario (in priority order IMHO): 1. Incentivize Multi-Year Deals: Cash up front is powerful. 2. Sell more by improving Sales Productivity and revenue retention. 3. Lean Operations: Cut expenses and reinvest them into sales capacty 4. Raise Venture Capital: Yes, it’s an option, but it comes with dilution and expectations. 5. Venture Debt: Non-dilutive funding can bridge gaps but creates balance sheet complexity and should be the last option Final Thoughts... The Growth Phase is definitely a roller coaster. You've crossed the "Silicon Valley of Death" but have not yet crossed into the IPO pipeline. By creating 3 planning scenarios, anchored on a base plan of "default alive", companies can scale responsibly while positioning ourselves for long-term success. You're not just building to grow, you're building to last. #founders #startups #venturecapital Horizon3.ai