B2B SaaS Metrics with the Master - Dave Kellogg @kellblog

**Ray Rike** (0:00)
Hello, I'm Ray Reich, Founder and CEO of RevOp Squared, and your host of the Metrics that Measure Up podcast. We talked to a wide variety of B2B, SaaS and Cloud thought leaders, executives, investors, and people just like you to discuss the metrics and benchmarks they use to make metrics informed decisions. Now on to today's show.
Welcome to today's episode of the Metrics It Measure Up Podcast. Today, we are joined by Dave Kellogg, multiple time SaaS CEO, CMO, and the founder of Kellogg. And to all the Star Wars fans out there listening, Dave to me is the Yoda of B2B SaaS Metrics. Today, we'll be covering four topics with Dave. One, how have SaaS Metrics evolved over the years. Two, the nuances and pitfalls of Metrics. Three, the SaaS Metrics that matter most in 2021 And finally, how will SaaS Metrics evolve in a product led growth and usage based pricing environment? Dave, please take a moment to give a brief background overview of your journey to becoming a guest on the Metrics That Measure Up podcast.

**Dave Kellogg** (1:17)
Measure or measure not, there is no try.

**Ray Rike** (1:21)
Very good.

**Dave Kellogg** (1:22)
I've heard the Yoda a lot. So thanks for having me, Ray. My name is Dave Kellogg. And my journey in summary form started out as tech support person at a database company, kind of worked my way over into marketing, ran marketing at two startups, one of which was Business Objects, as we grew to be a billion dollars in revenue. I then ran two startups as CEO, Mark Logic and Host Analytics in between. I was a GM at Salesforce, and I currently sit on boards to advising, consulting and blogging about SaaS Metrics and very happy to be here.

**Ray Rike** (1:53)
Yeah, and also Dave is a prolific tweeter, so at the end, we'll make sure you guys get his handle at Twitter because he's a must-follow. But Dave, you are the most metrics-oriented kind of thought leader in the industry. And I just wondered a little bit about what are the top five company-level metrics that you recommend every CEO or CFO in a private SaaS company to make sure they measure and use to make better decisions?

**Dave Kellogg** (2:20)
So I think you're going to be the top ones I can think of. And they're going to start a little bit unexciting and basic, but you asked for top. So I can't not start with ARR. So ARR is the first, right? because that's the whole point. How much is the subscription base? And then ARR growth is the next one. And, you know, if you could only know two things about a company and had to guess what it's worth, that would do it. And I think last time I checked growth explains, I don't know, half of company valuation, maybe more. You know, the R-squared between enterprise value to revenue multiple and ARR growth is at least 50% the last time I checked. So those two, ARR and ARR growth rate, then immediately after that, we start to get more sassy in some sense, NDR, Net Dollar Retention. And this to me is a metric that we can use kind of instead of a bunch of other metrics that we used to look at, like churn or LTV. To me, NDR is replacing them.
I would say NPS and the quinceau Net Promoter Score, NDR, Net Dollar Retention. NPS Net Promoter Score, because we want to know happy the customers are, because look, you could have a great expansion rate, but people might not be happy, right? So we can't assume renewal means happiness. By the way, we can't assume that non-renewal means unhappiness. So the beauty of taking NPS, where we just effectively ask, are you happy independently of your renewal or expansion behavior? Very important. And then finally, if I only got one more, because I got five, I would do employee NPS, which is how happy are your employees? because obviously software companies are all driven by people. If I got to sneak in one bonus one, it would probably be customer acquisition cost. because I think while a lot of people calculate customer acquisition cost, I don't think they actually act on it.
because literally, if you have a customer acquisition cost of 1.2, or some reasonable low for enterprise software, customer acquisition cost, and you have reasonable churn, so you have, let's just say gross churn less than 10 percent, maybe net dollar expansion in 110 The question is, why aren't you spending as much money as possible to my customers? To me, in some ways, your CAC is your limiting lever on how fast you should be growing.