Bootstrappers don't have a finance team, so you have to be your own. The good news: a handful of numbers tell you almost everything about the health of a small software business. Ignore the vanity metrics; watch these.
MRR — monthly recurring revenue
The heartbeat of a subscription business. Track it monthly and split it into new, expansion (upgrades), contraction (downgrades) and churned revenue, so you can see where growth comes from — not just that it happened.
Churn — the silent killer
The percentage of customers (or revenue) you lose each month. At 5% monthly churn you replace your entire customer base every ~20 months just to stand still. Small differences compound brutally, which is why lowering churn is often higher-leverage than chasing new sign-ups. See retention beats acquisition.
LTV and CAC
- CAC (customer acquisition cost): everything you spent to win a customer, divided by customers won.
- LTV (lifetime value): the total profit you expect from a customer before they churn.
- The ratio. A rough rule is LTV at least 3× CAC. If it costs more to acquire a customer than they're worth, growth makes you poorer, not richer.
Runway and "default alive"
How many months you can keep going at your current burn. Paul Graham's question is the one that matters: are you default alive — on track to reach profitability before the money runs out — or default dead? A bootstrapper's job is to get to default alive as fast as possible.
Pick three numbers — for most SaaS that's MRR, churn and runway — and put them somewhere you see them weekly. What you measure, you manage.
Healthy metrics usually start with pricing well and keeping the customers you already have.