Everyone talks about "retention" being the real growth driver in SaaS. But most teams still measure it wrong. Here’s how I look at it 👇 The best retention analysis answers one simple question: how much of the revenue being generated by our CURRENT customer base will we have 365 days from now? If they’re producing $10M in ARR today, will that number be worth $11M a year from now, or $9M – completely irrespective of who you add new? Most teams don't actually isolate that. Intentionally or not, they mix in revenue from new customers or expansion from accounts that signed up in the past year. Either way, they inflate their numbers and end up polluting the signal. It might look like stronger retention on paper, but it’s really just masking what your customer base is actually doing… Instead, think of it this way: If you completely froze new customer acquisition today and just looked at your existing customer base, what would happen to revenue over the next 12 months? When you isolate that, you start to understand the true mechanics of your business. Once you know what your current customers will do, you can calculate exactly how many new customers you need to add to hit your goals. But first, you have to isolate the existing customer base. It’s the foundation everything else builds on.
LeeRon Yahalomi
1mo
Most teams call it “retention” when what they’re actually measuring is blended growth. Until you isolate the existing base, you’re flying blind on what’s really compounding and what’s just masking churn with new revenue. True retention is the mirror it tells you if your value is sticky or just noisy.
Rees G.
1mo
Ethan Ruby, is it tricky to differentiate between real growth and just fancy math? solid points here. 📈
NRR is a backward-looking efficiency metric. Retention Yield is forward-looking and it measures whether your capital is compounding equity or leaking it. You can post 120% NRR and still be leaking founder equity if the capital curve hasn’t bent below the ARR curve. That’s a strong P&L snapshot signal with weak balance-sheet physics — a mispriced asset hiding behind growth optics. The real test isn’t NRR. It’s whether your capital curve inflects below your ARR curve — that’s the alpha moment when equity compounding begins and you stop trading equity ownership to buy growth. This is first principles value creation. How many SaaS teams do you think are actually measuring yield-per-dollar of capital instead of retention optics?