Wed, 26 January 2022
Efficiency and Predictability Metrics
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
In addition to growth, there is efficiency to measure. This is important to consider as you grow your business.
Here are some key metrics to use:
Magic number - shows how many revenue dollars your sales and marketing dollars generate.
To calculate, take current quarter revenues minus previous quarter revenues times four and divide by previous quarter sales and marketing expenses.
A result above .75 shows your sales and marketing process is working well.
Sales efficiency - use the Gross Margin CAC Payback, which measures the number of months required to repay the cost of customer acquisition, taking gross margin into account.
To calculate, take sales and marketing for the month and divide by the Net New MRR in the month times gross margin.
Bessemer CAC Payback Period - measures the number of months it takes for the revenue to pay back the cost of customer acquisition, taking the timing of the revenue into account.
To calculate, take the sales and marketing expense for the previous quarter and divide by the new MRR in the previous quarter times gross margin.
Efficiency metrics show the strength of the business and indicate the ability to scale.
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