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The metrics, "rules of thumb", and "conventional wisdom" that apply to SaaS businesses do not extrapolate well to non-software subscription businesses. The mai
by femto113 7y ago
The metrics, "rules of thumb", and "conventional wisdom" that apply to SaaS businesses do not extrapolate well to non-software subscription businesses. The main reason for this is SaaS has enormous gross margins, often upwards of 90%. This makes revenue a reasonable proxy for (gross) profit. The margins on physical goods are tiny by comparison, for food often in the low single digits, and subletting real estate is not much higher (if at alL). When profit is such a small percentage of revenue you have to be a lot more detailed in the math for lifetime value, acquisition cost, and so on, and you can no longer rely on simple formulas based on revenue and run rate.
- hn_throwaway_99 7y agoWhile I agree with many of your points, I'd add that adding in the additional metrics you mention (lifetime value, acquisition cost, etc.) would make Blue Apron look even worse. My main point is that basically the only thing Blue Apron had going for it was topline growth, but by pretty much every other metric it looked horrible and unsustainable. SaaS quick ratio alone should have clearly highlighted how unsustainable that topline growth was given their through-the-roof churn rates.