We work on a lot of products that have a monthly or yearly subscription business model. There are some classic metrics we know we want to track for these products, such as:
- Monthly Recurring Revenue (MRR)
- Active subscriptions
- Lifetime Value (LTV)
- Churn per-plan, monthly and annually
Since we use Stripe for payments, we've found Baremetrics is the fastest and easiest way to track these metrics.
If our clients want to raise money from investors, the following numbers are generally considered investment-ready:
- LTV is 3x-5x greater than Customer Acquisition Cost (CAC)
- 10-30% month-over-month growth in MRR
- 5-7% annual churn
Churn is particularly critical when fundraising. Small changes in churn can drastically improve valuation.
Calculating CAC is a manual spreadsheet exercise. It requires adding employee overhead costs and direct marketing costs together, then dividing by the number of new customers for that month.
For our own products, we rely on our bookkeeper, Supporting Strategies to provide us with those numbers, and make adjustments for which vendors such as Google (AdWords), Twitter, or AdRoll fall under the direct marketing accounting class.