facebookWhat metrics should we consider for software companies’ when analysing the company's financials? Am I missing anything out apart from CAC, Churn rate, DBNER metrics? - Seedly

Anonymous

09 Dec 2020

Stocks

What metrics should we consider for software companies’ when analysing the company's financials? Am I missing anything out apart from CAC, Churn rate, DBNER metrics?

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Yu Qi Tan

09 Dec 2020

Student Ambassador 21/22 at Seedly

Generally:

Gross margins should be in the high ends of 70% to 90% because the nature of software and code is that it is very scalable. The marginal cost of producing an additional piece of software is close to zero.

Some general metrics:

1) rule of 40 : revenue growth + FCF margin should be more than 40%

2)LTV(lifetime value)/ CAC

3) Churn Rate

4) Dollar Based net retention rate

5)Quota/OTE

6)P/S

7)EV/recurring profit

Hope it helps!

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