Drew Simpson
Accurately calculating gross margin for your SaaS business
Gross Margin is a concept that can be tough to wrap your arms around if you’re running a SaaS business. At its core, gross margin is the percentage of revenue left after the cost of servicing that revenue.
Why should you care about gross margin? Easy. Gross margin is representative of the amount of cash your business is generating to cover all of your operating expenses. Sales and Marketing, your office, your big management salary -- that's all covered by gross margin. Additionally, the higher your margin is, the more money you can reinvest back into your business to accelerate your overall growth trajectory. The more you can make and reinvest, the faster you'll grow.
Calculating customer acquisition cost ratio (CAC Ratio) for your SaaS business
As a SaaS entrepreneur, there are countless numbers, statistics, and metrics that you need to track and calculate to assess the health of your business, but the sheer number of acronyms can be overwhelming. In this series on key SaaS metrics, we walk you through the most common—and helpful—metrics you need to know to successfully run and grow your SaaS business.
How can you evaluate the success or failure of your sales and marketing campaigns? Are they worth the money you’re putting into them? Or is the payback period so long that you should shift tactics? There’s only one way to know for sure, and that’s by figuring out how long it takes to effectively pay back your costs with the money earned from the new sales generated by your sales and marketing efforts.