The Economy of Hugs

Why The Best SaaS Companies

Treat Every Day Like Valentine's

“We surveyed 306 companies to

gather benchmark data with

regard to growing a successful

SaaS business.”

-- David Skok, Matrix Partners

CAC ACV LTV DRR

Important Acronyms & Lingo

Cut the crap!

Just tell me why the

best SaaS companies

treat every day like

Valentine's.

SaaS companies invest big

$$ to acquire new friends...

go on dates...and get hugs.

CAC = Cost of Acquiring Customers

In this sense

hugsare the universal

currency of SaaS

companies...

Of course,

not all

friends are

equal.

SaaS companies

carefully measure the

number of hugs per

friend, per year.ACV = Annual Contract Value

They also measure hugs

received over lifetime.

LTV= Life Time Value

$@!t happens.

So SaaS companies also

measure breakups...

Churn

…and total annual

hugs minus breakups.

DRR = Dollar Retention Rate

Ultimately, SaaS

companies have 3 types

of friends:

• Friends with Benefits

• Friends with Costs

• Friends with Biggest

Benefits

Friends with benefits

stick around and give

many hugs over time.

LTV > 3X CAC

Friends with costs

give few hugs and

leave early.

LTV < 3X CAC

Friends with biggest benefits

not only stick around...

but they give more hugs the

longer they stay.

LTV > 10 X CAC

So, it's all about the hugs!

And that's why the best SaaS

companies treat every day

like Valentines.

Happy Valentine’s

DayDon’t forget to hug your customers!

Follow me @matthewjhoward