How to Calculate the SaaS Magic Number

SaaS operators must understand the balance between sales and marketing spend and the acquisition of net new revenue. Enter the SaaS Magic Number.  Here are my thoughts on how to use the Magic Number in 2025. Overinvest in sales and marketing relative to your new SaaS ARR bookings and will you not the see the […]

How to Properly Structure Your SaaS Accounting Foundation

saas accounting foundation

The Software as a Service (SaaS) business model revolutionized the on-premise software industry. I started out in software in 2004. One-time software sales and annual maintenance at 18% of the perpetual license. We weren’t talking CAC Payback and Gross Revenue Retention. But we were talking gross margins and margins by revenue stream. SaaS introduced a […]

Understanding Contracted Annual Recurring Revenue: A Comprehensive Guide

contracted annual recurring revenue

Contracted Annual Recurring Revenue (CARR) was an obscure metric in the SaaS world years ago. Today, it’s become a hot and controversial SaaS metric when discussing company growth and SaaS valuations. CARR is a forward-looking SaaS revenue metric that estimates the maximum revenue size of a SaaS company. CARR combines two important aspects of revenue: […]

How to Calculate Margins by Revenue Stream

saas gross margins by revenue stream

Gross margin analysis is fundamental to assessing the profitability and overall financial health of your SaaS business. First, we must understand our overall gross profit. Overall gross profit is commonly calculated incorrectly. Next, we must understand the health of each revenue stream. Each revenue stream’s gross profit contributes to our overall gross profitability. Margins by […]

How to Effectively Manage Your Professional Services Team with Metrics

professional services

Your professional services team plays an important role in your SaaS company. Botch a customer onboarding and you may have just lost valuable ARR. Services means different things to different companies. It could be a one-hour onboarding call or a twelve-month implementation project. Either way, we must understand several key concepts to effectively manage our […]