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Customer acquisition efficiency:The CAC ratio (i.e. cost to acquire $1 of ARR and Annual Gross Margin). We want you to be in the business of paying $2 to get $1 a year in revenue and $0.90 a year in gross margin, and keep and grow that customer over time.
Long-term value:LTV:CAC ratio (using gross margin and a maximum 5-year lifespan). We deliberately cap the lifetime to what we call "long term" (5 years) to avoid the cognitive distortions that low logo churn (or negative dollar churn) can create on this metric.
Retention & upsell:Gross logo churn, net dollar churn (which we can help you make negative). We want to back businesses whose customers love them, stick with them, and spend more with them over time.
Profitability:It doesn't matter how great your top-of-funnel is, or your user experience, if you can't deliver your product with sustainable profitability. We think gross-margin per customer is the best metric to shine a light on this.
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