Ultimately, though, good metrics aren’t about raising money from VCs — they’re about running the business in a way where founders know how and why certain things are working (or not) … and can address or adjust accordingly.

Investors more highly value companies where the majority of total revenue comes from product revenue (vs. from services). Why? Services revenue is non-recurring, has much lower margins, and is less scalable.

A common mistake is to estimate the LTV as a present value of revenue or even gross margin of the customer instead of calculating it as net profit of the customer over the life of the relationship.

Contribution Margin LTV to CAC ratio is also a good measure to determine CAC payback and manage your advertising and marketing spend accordingly.

A good proxy to measure the growth — and ultimately the health — of a SaaS company is to look at billings, which is calculated by taking the revenue in one quarter and adding the change in deferred revenue from the prior quarter to the current quarter.

While blended CAC [total acquisition cost / total new customers acquired across all channels] isn’t wrong, it doesn’t inform how well your paid campaigns are working and whether they’re profitable.

This is why investors consider paid CAC [total acquisition cost/ new customers acquired through paid marketing] to be more important than blended CAC in evaluating the viability of a business — it informs whether a company can scale up its user acquisition budget profitably.

Cumulative charts by definition always go up and to the right for any business that is showing any kind of activity. But they are not a valid measure of growth — they can go up-and-to-the-right even when a business is shrinking. Thus, the metric is not a useful indicator of a company’s health.