Questions

Two: (a) Top-line growth and (b) Cancellations.

I like businesses where "growth" means "revenue," otherwise to me it's only an indication that people are mildly interested rather than proof that it's a *business* that is turning into a validated business model. But of course with consumer often you have to be content with "active users" or somesuch.

True revenue growth I measure (early on) in $/mo of new recurring revenue, not in percentages (because those will be all over the place and large, just because the denominator is small). It's nice to see that number steadily growing, usually linearly (no, not exponential!). It's OK for it to bounce around early on, e.g. you get a big pop from good PR or a dip because it's December.

Soon I like to see you follow that with increasing ARPU, because almost always your prices are too low and you need higher ARPU to drive a real, profitable business, and to allow for higher CAC which means the ability to get varied sources of new signups. But that's not for very early on -- you can do that next. Just having people sign up at all for any amount of non-zero dollars is a wonderful sign.

The other is cancellation. I've seen companies where their cancellation rate is 25%/mo. That means people turn over completely in 4 months, and that means it's NOT a SaaS business!

More importantly, it means that although you've gotten them in the door, and even paying, the fact is you're not delivering perceived value, and that means you don't actually have a product people want, nor a business.

Note I said "perceived." Sometimes you ARE delivering value but they don't understand that, so education or a better UX or follow-up is actually what's needed. Usually you are in fact not delivering much value, and that's what needs to be addressed.

If cancellations are above 5%/mo, you don't have this "fit," and there's no sense in spending time/money growing fast when the bucket is so leaky. You're just force-feeding something rotten.

Actually a SaaS business needs to be more like 2%/mo in the long run, else it cannot grow large enough and without tremendous marketing/sales expense. But to me, <5%/mo *early* on is good enough that you can address that over time.


Answered 6 years ago

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