Here is a fun KPI to track – What is your Time to the next Million in ARR?
TTM = Time to Next Million
This is the SaaS KPI you want to track between 0 and 10m in Euro ARR!
TTM (Time To Next Million) measures the number of days it took your SaaS to add your last million in ARR (it could be 100k, 500k, or whatever value you see fit). As simple as it is, it also provides insight into how your GTM investments are paying off. Your first million in ARR will take the longest to rack up, your 2nd will be a little faster, and your 3rd even quicker, and so on. At least that is how it should be if you are making the right investments and executing well.
Why is this an important metric to monitor?
Because it is a direct reflection of the effects of your entire Go-To-Market investment and how efficient it is. As you grow, the natural trajectory is to invest more in Sales, Marketing, Customer Success, and Product. At 5m Euro in ARR, you will most likely have more salespeople, greater marketing spend, a more sophisticated CS function, and of course, a product that provides greater value compared to when you were at 1m Euro in ARR. With all these great investments into the GTM function, it is clear that going from 9m to 10m Euro in ARR should be much faster than going from 1m to 2m Euro in ARR. If you are not seeing this in your SaaS, then you have a revenue process issue!
I compare this with amateur car racing: Imagine that my goal is to drive around a track in the shortest amount of time. Let’s say it takes me 2 min to do so in my current Volvo. If I then go and spend tons of money on a Ferrari and racing lessons and still need 2 min to drive around the same track…well, that doesn’t sound like a good investment, does it? Sure, it gives me some street cred, but it isn’t well-spent money as it did not improve my track time.
Compare this now with raising money, making investments across the board, and then not seeing any acceleration in your TTM. See, people may applaud you for raising money, having a big team, etc., but if it doesn’t lead to a faster TTM, then what is the point? If you haven’t heard of this metric before, don’t worry. I came up with it the other week with heavy inspiration from my good friend Nick at Ardoq, who was kind enough to share their TTM progress with me the other day.
And if nothing else, it will be a fun and inspiring KPI for your GTM team to go after, making sure that the next million is added faster than the previous. What is your TTM?
Shall we do a benchmark of TTMs across different revenue levels, employee counts, ticket size, and funding stages? Let me know if you’d like to see that and we’ll see what we can do.
PS: Like with any metric there can be skewed results and false positives, I get it. You can add 100 more people between 1m and 2m and therefore see a faster TTM, but at the same time, it might actually show that your CAC is higher if you are not significantly speeding up and therefore in reality less efficient than previously.
