Choosing metrics for your business model
SaaS, consumption, services: which numbers matter, which mislead, and the discipline behind them.
The fastest way to mismanage a business is to run it on the metrics of a different one. Consumption businesses reporting pure MRR, and services businesses reporting ARR, are the 2 most common versions of this.
Subscription
- MRR and ARR, with the 4 movements underneath them
- Net revenue retention, the single best predictor of the next year
- Quick ratio: gains over losses, and whether growth is efficient
See it in the product: ReportingARR, retention and receivables reports that tie to your invoices.
Consumption
- Committed spend against drawdown, not just billed revenue
- Utilisation of contracted capacity, the leading signal for both expansion and churn
- Breakage on prepaid credits, stated openly rather than discovered at audit
Services
- Total contract value and backlog, not annualised run-rate
- Percent complete by value, not by milestone count
- Realisation and billable utilisation, where margin is actually won or lost
Report the number that changes what you would do. Everything else is decoration.
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