🎙️ Hey there, SaaSpreneurs!🎙️

Greetings, SaaS enthusiasts! Welcome back to another exciting episode of SaaS Metrics School with your host, Ben Murray. In today's edition, we dive into the crucial topic of how to adjust your sales and marketing efficiency metrics for variable revenue. As the SaaS landscape evolves and multiple revenue streams become the norm, relying solely on traditional metrics can lead you astray.

In this episode, Ben shares insights from his renowned SaaS Metrics Foundation course at thesaasacademy.com. He shines a spotlight on pillar five of his SaaS metrics framework, focusing on efficiency metrics for sales and marketing.

Join us as we explore the concept of variable revenue, its distinction from fixed subscription revenue, and why adjusting the metrics is essential. From calculating CAC payback period to finding the right margin adjustments, Ben breaks down the process in a practical and approachable manner.

You can also listen to the episode here.

BTW, have you joined Ben’s SaaS community yet?

📓Key Concepts to Learn💡

1️⃣ Variable Revenue: Refers to revenue that varies on a monthly basis, such as usage-based or consumption-based revenue.

2️⃣ Adjusting Metrics: Traditional SaaS metrics can mislead you when you have a combination of subscription revenue and variable revenue. Adjusting metrics like CAC payback period is crucial to accurately reflect the impact of variable revenue.

3️⃣ Margin Adjustment: When considering variable revenue, it's important to apply the appropriate gross margin adjustment to accurately calculate metrics. You must include the cohort ARPA and related margin from all recurring revenue streams. If not, don’t bother.

4️⃣ Historical Data: Looking at historical data helps estimate the average amount of variable revenue customers provide you upon acquisition, allowing you to adjust formulas accordingly.

5️⃣ Sales and Marketing Efficiency Metrics: When there is a significant amount of variable revenue (e.g., 20% or more), traditional metrics can be misleading and dangerous. Therefore, it's crucial to adapt your sales and marketing efficiency metrics to account for both subscription and variable revenue streams.

🌟 Quick Tips for Adjusting Metrics: This episode provides quick tips on how to adjust metrics based on your revenue streams, highlighting the importance of considering the impact of variable revenue on sales and marketing efficiency

📝 Episode Recap 🎧

In this episode of SaaS Metrics School, Ben Murray dives into the topic of how to adjust sales and marketing efficiency metrics for variable revenue. As businesses now often have multiple revenue streams, it is crucial to make changes to traditional SaaS metrics to avoid being misled.

Ben defines variable revenue as any form of revenue that fluctuates month to month, such as usage-based or consumption-based revenue. When combining subscription revenue with variable revenue, it is important to adjust metrics like CAC payback period and factor in the appropriate margin adjustment for variable revenue.

While there's no one-size-fits-all approach, Ben suggests estimating the average variable revenue based on historical data. This estimate can be used to adjust formulas and apply the relevant gross margin to the variable revenue. However, it's important to note that variable revenue can change over time, so regularly reassessing metrics is necessary.

One key takeaway from this episode is that if your business relies on both subscription and variable revenue, it's crucial to adapt your sales and marketing efficiency metrics to avoid being misled. For a more detailed exploration of this topic, check out Ben's SaaS Metrics Foundation course.

If you enjoyed this episode, don't forget to leave a rating and share your feedback. Stay tuned for the next episode of SaaS Metrics School!