Continuing with the post a couple days ago on Bessemer’s Updated Top 10 Laws of Cloud Computing (that name is better suited to be “Cloud Computing Companies” as the current title sounds more technical than it really is) one of the most important ones, after #9 about corporate culture is #5 titled: Play moneyball in the cloud, and check the scoreboard with the 5 Cs of Cloud Finance. The good thing about these metrics is that they are incredibly powerful while still being easy to understand — a rare feat in much of the financial world.
Here are Bessemer’s 5 Cs of Cloud Finance:
- CMRR, ARR, & ARRR – Committed Monthly Recurring Revenue, Annual Recurring Revenue, and Annual Run Rate Revenue.
- Cash Flow – Start with Gross Burn Rate and Net Burn Rate, then hopefully turn to Free Cash Flow over time.
- CAC – Customer Acquisition Cost Payback Period.
- CLTV – Customer Lifetime Value.
- Churn & Renewal Rates – Logo Churn, CMRR Churn, and CMRR Renewed.
Every Software-as-a-Service company should have a Google Spreadsheet where they track each of these values on a monthly basis and discuss it with their senior management team on a regularly.
What else? What are your thoughts on Bessemer’s Updated 5 Cs of Cloud Finance?