Comparing Sales & Marketing (S&M) spend to ARR from new customers helps show how efficiently S&M spend translates to new revenue.
Customer Acquisition Cost (CAC) measures how much, on average, it costs to acquire a new customer.
Magic Number compares how sales and marketing spend translates to changes in ARR, taking expansion, contraction, and churn into account.
CAC Payback Period measures how many months it takes a cohort of customers to produce enough Gross Profit to pay back the sales and marketing expenses it took to acquire those customers.
Gross Profit is the percent of revenue retained by a company after they pay their Cost of Goods Sold (COGS).
Burn Multiple is a measure of capital efficiency, comparing how much ARR a company adds in a period to how much cash was burned.
Lifetime Value (LTV) on a Gross Profit basis is a summary metric that tracks total Gross Profit, net of CAC, generated by a cohort over time.
Burn measures the change in a company’s cash balance in a month, while runway measures long a company can continue to operate without running out of cash at current levels of burn.
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