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Financial Metrics & Valuation

image depicting the balance of growth and profitability in the rule of 40

FINANCIAL METRICS & VALUATION

Understanding the Rule of 40: A Key Metric for SaaS Success
June 11, 2024

The "Rule of 40" in SaaS valuations is a rule of thumb used to assess a company's financial health and growth potential. It suggests that the sum of a company's…

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SaaS Company Bridge Analysis

FINANCIAL METRICS & VALUATION

What Your SaaS Company’s Bridge Analysis Tells Potential Buyers
February 6, 2024

In previous posts, we discussed the importance of understanding ARR and how to properly calculate customer and ARR churn. In this post, we’ll explain how viewing these metrics in conjunction…

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FINANCIAL METRICS & VALUATION

SaaS Multiples 2024: What Does the Future Look Like for M&A Market Valuation?
December 21, 2023

The following content has been updated as of December 2023. While the software M&A market feels the impact of some of the same macroeconomic forces affecting public companies, it’s important…

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FINANCIAL METRICS & VALUATION

The Impact of Gross Margin on SaaS Valuations
November 15, 2023

“Gross margin” is likely a term you’ve heard floating around the SaaS industry, and for a good reason: it serves as an essential metric for businesses in the software space.…

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SEG Unit Economics

FINANCIAL METRICS & VALUATION

Understanding and Optimizing Unit Economics in SaaS: A Guide for Founders
November 7, 2023

Achieving profitable growth is the top priority for most SaaS businesses. So, naturally, business owners want to know the best way to get bigger faster, without undermining their financial stability…

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FINANCIAL METRICS & VALUATION

Understanding the SaaS Financial Model: Key Concepts and Methods
October 31, 2023

Most SaaS founders have a clear vision for their business. They are focused on creating new products, finding new markets, and attracting new customers. However, there may be a significant…

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cost of goods sold

FINANCIAL METRICS & VALUATION

How to Calculate Cost of Goods Sold (COGS) for SaaS Companies w/ Examples
October 26, 2023

While Cost of Goods Sold, or COGS as it's known in the world of accounting, is a seemingly straightforward principle, it is frequently miscalculated by software company entrepreneurs. COGS is…

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What is ARR for SaaS

FINANCIAL METRICS & VALUATION

Understanding ARR for SaaS Leaders: Its Impact, Calculation, and Role in Growth Strategy
October 10, 2023

Annual recurring revenue (ARR) is a critical measure of any SaaS company's success and is one of the most important factors private equity investors and strategic buyers assess when evaluating…

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Gross and Net Retention

FINANCIAL METRICS & VALUATION

Gross Retention vs. Net Retention: The Pivotal Shift in SaaS M&A
September 26, 2023

The software M&A market is like a living and breathing organism: constantly evolving, adapting, and reacting to the world around it. This is especially true in recent years, with COVID…

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FINANCIAL METRICS & VALUATION

Net Dollar Retention: Formula, Benchmarks, and Areas to Improve for SaaS Businesses
July 19, 2023

Historically, few metrics have been as closely tied to SaaS company valuations as net dollar retention (NDR), also commonly referred to as net revenue retention, net ARR retention, or simply…

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