What is a good Rule of 40 score?

A Rule of 40 score above 40% is considered excellent, indicating strong balance between growth and profitability. Scores of 20-40% are good, while below 20% suggests the company needs to improve efficiency or accelerate growth.

What is an ideal LTV:CAC ratio?

The ideal LTV:CAC ratio for SaaS companies is 3:1 or higher. This means customer lifetime value should be at least 3x the customer acquisition cost. Ratios above 5:1 might indicate under-investment in growth.

How do you value software companies?

Software companies are typically valued using revenue multiples (EV/Revenue) ranging from 5-20x for public SaaS companies, though high-growth AI infrastructure companies can command 30-50x+ multiples. The multiple depends on growth rate, profitability, market size, and competitive position.

What is net revenue retention (NRR)?

Net Revenue Retention measures the percentage of revenue retained from existing customers over time, including expansions and churn. Best-in-class SaaS companies achieve 120%+ NRR, meaning existing customers spend 20% more year-over-year.

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