The GTM Metrics Index

Read time: 12 minutes

Written by:

Eddie Reynolds
Founder & CEO

Click here to see and download the full-size infographic.

This Index will show you how to calculate each metric outlined in our GTM Metrics and Insights Framework. Visit the Framework to get our in-depth process on identifying the right metrics to track, getting accurate data for those metrics, and turning that data into impactful insights your GTM Team can execute on.

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GTM Efficiency Metrics

How efficient is our overall GTM Engine? How many new customers and additional dollars of $ARR and Gross Margin can we produce for every $1 we invest? To answer these questions, we have a number of extremely popular metrics and a couple new ones.

CAC and CAC Ratio

Customer Acquisition Cost (CAC) tells us the cost to acquire one new customer and the CAC Ratio tells us the cost to acquire one new dollar of ARR, which is more telling as different companies, customers, products, channels, etc., all have different average deal sizes.

CAC Ratio can be broken into New Business or Expansion or blended together into one metric.

CAC Payback Period

The CAC Payback Period tells us the number of months it takes us to recoup our investment in sales and marketing. This is sometimes measured by revenue or MRR. However, we prefer measuring it in Gross Margin as that tells a more accurate story on the time to recoup our costs.

LTV:CAC

LTV:CAC tells us the total revenue we can expect during the lifetime of the average customer for every dollar we spend to acquire that customer. Anything over 3:1 or $3 is commonly viewed as healthy.

Estimating LTV 10, 20, 30 years out is quite speculative, though, so some prefer to limit it to the expected value in the first five years.

Magic Number

The Magic Number tells us the total revenue growth for every dollar spent on sales and marketing.

It’s quite a short-term metric though, as numbers can change radically quarter over quarter and what we spent last quarter will impact revenue much further out. We prefer longer-term metrics below.

GTM Efficiency Ratio / Margin

The GTM Efficiency Ratio is our new favorite, introduced this year by David Spitz of BenchSights. It takes the concepts above, as well as sales and marketing efficiency, and combines them into one metric to answer one simple question.

What does it cost to generate $1 of additional ARR? (From new business, plus expansion, minus churn.)

I would take this a step further and ask, what does it cost to generate $1 of additional Gross Margin. This would allow us to better benchmark against different companies with different margins, as well as comparing different teams, geos, products, customer types, etc in our own business.

Additionally, we can bake our Customer Success costs into this metric to get a truly holistic view. Some of those costs will go into Sales and Marketing, such as Expansion sales. Other costs will go into Gross Margin, such as the cost of service. We can include churn to see our total net new $ARR.

This gives us a holistic view of every dollar we need to spend in sales and marketing to land and expand customers for every dollar we are able to grow gross margin, including whatever churn we have to make up for.

Financial Metrics

How is our company performing financially? We’ve looked at the efficiency of our GTM Engine. Now we need to look at the performance of the business as a whole.

Rule of 40

The Rule of 40 states that if our Growth Rate + Profit Margin is ≥ 40%, we have a healthy business. High growth businesses are often not profitable and this rule helps us understand if growth is enough to make up for low or negative profitability.

Bookings & Growth Rate

The first piece of our Rule of 40 is our Growth Rate and that’s driven by Bookings. Bookings are the signed contracts we have for $ARR, as well as other things like one-time services, if we have them. It’s important we track bookings carefully, breaking them apart by bookings from new customers vs. expansion vs. renewals.

Gross Margin

Gross Margin tells us how profitable our products and customers are before we pay for sales and marketing and the general overhead of the business. Cost of Goods Sold includes all costs to provide our product and/or any services and is subtracted from revenue to calculate Gross Margin.

Taking this number and dividing by our total revenue gives us Gross Margin as a %. This is extremely helpful when benchmarking against other companies, and within our company across different products, categories of customers, etc.

Net Income/FCF Margin/EBITDA

Next we look at profitability, the Net Income in our financial statements, as well as the Free Cash Flow, or Operating Cash Flow the business is producing from daily operations before cash is impacted by investing and financing activities.

EBITDA is a simple way to calculate the rough cash flow by looking at earnings, or Net income, before subtracting the costs of interest, taxes, depreciation, and amortization. Later-stage investors look at this number because, if the company is sold, the new owners may have different costs for these items.

OpEx Profile

Lastly, we have our OpEx Profile, looking at various expenses in our business as a percentage of revenue.

For the purposes of a GTM Metrics Index, we will just look at Sales and Marketing Expense as a percentage of revenue, but a CFO would look at each and every area of the business to determine if they are overspending or underinvesting.

Pipeline Metrics

We’ve looked at the overall efficiency of our GTM Engine and the financial strength of the business. Now it’s time to go deeper into each step in the GTM process. That starts with our ability to close deals, both new business and expansion.

The reason we start here is because we see so many companies asking for “more leads!” and filling the funnel just to lose deals in a broken sales cycle. To identify these issues so that we can address them, we need to look at our pipeline metrics.

Close Rate

Close Rate is extremely simple. We look at the number of deals we won over the total number of deals we won and lost. This does not include deals that are still open in our pipeline because we just want to see what % of deals we’re winning when all is said and done.

ASP (Average Sales Price)

Next we look at our ASP (Average Sales Price) or average deal size. To calculate this we simply take the total sales, or the total amount of $ARR we’ve closed, and divide by the number of deals we won.

Sales Cycle

Sales Cycle is simply the number of days between the date we created the qualified opportunity and the date it was Closed Won. It’s very important here to look ONLY at Closed Won deals. Closed Lost deals almost always have much longer sales cycles and this doesn’t tell us how long it takes to win a deal.

Pipeline Velocity

Pipeline Velocity combines all three of these metrics and the total number of deals in pipeline we’ve created to give us a sense of how fast we’re moving revenue through our funnel.

Pipeline Generation Metrics

Now that we’ve looked at our ability to close qualified sales pipeline, let’s look at our ability to create it.

Pipeline Generation (# and $)

First, we simply look at the total number of Sales Qualified Opportunities we’ve generated. This is first broken down into New Business vs. Expansion. Within New Business it’s then broken down by Channel, whether it be outbound, inbound, events, etc. and then further broken down by Lead Source.

We may also look at the total dollars of pipeline generation. However, this can be tricky as we often don’t know how much a Stage 1 Opportunity might close at. It’s more accurate to look at the number of deals created and then look at the ASP from actual Closed Won deals.

Lead Generation (MQLs)

Next, we simply look at the total number of leads, or specifically MQLs (Marketing Qualified Leads) we’ve generated through each channel and Lead Source. This is more a function of marketing as we don’t typically use leads in outbound prospecting or expansion sales. In those cases we have an opportunity or we don’t.

Meetings Booked and Held

For outbound prospecting, since we don’t have MQLs, our best leading indicator of Pipeline Generation is the number of meetings booked. We may also want to look at the number of meetings actually held if we have a lot of no-shows.

Additionally, if our inbound leads are not asking for a meeting, if we need to chase them, it may be advantageous to track meetings booked and held as KPIs between the MQL and the SQO.

Sales Activity

Lastly we have sales activity. How many calls, emails, LI DMs, has our team logged to prospect into new accounts and/or to expand existing accounts?

Conversion Rates

Now we can take all of the above and look at the conversion rates across the customer journey, as well as by team, rep, product, customer type, geography, etc.

Here are just a few of the conversion rates we would look at:

MQL to SQO
Meetings Booked to SQO
Sales Activities to Meetings Booked

CS Metrics

Lastly we have Customer Success Metrics, starting with Net Revenue Retention. If we are starting the year with $80M in revenue, how much revenue can we expect at year end from the customers we have today?

And what other metrics might we look at to give us leading indicators on the health of our customers?

Gross Retention Rate

Gross Retention Rate measures the percentage of revenue retained from existing customers, excluding upsells or expansions. Churn is the inverse of GRR, representing the percentage of revenue lost due to customer cancellations and downgrades. GRR is a pure retention metric, revealing how well the company maintains its core revenue without growth from expansions or new business.

Expansion $ARR

Expansion ARR measures additional revenue from existing customers through upsells, cross-sells, and add-ons. It’s a critical indicator of the CS team’s ability to grow accounts over time and enhance the customer’s investment in the platform.

Expansion can also be looked at through the lens of Pipeline Metrics and Pipeline Generation Metrics, from sales activities to meetings to Expansion SQOs created to Close Rate, ASP, and Sales Cycle.

Net Revenue Retention

Net Revenue Retention (NRR) measures the growth or decline of revenue from existing customers over a set period, including expansions, contractions, and churn. High NRR indicates successful retention and growth within the existing customer base, showcasing customer loyalty and upsell potential.

CSAT (Customer Satisfaction) & NPS (Net Promoter Score)

CSAT (Customer Satisfaction) & NPS (Net Promoter Score) gauge customer satisfaction and loyalty. CSAT scores reflect immediate satisfaction with interactions or products, while NPS measures long-term customer loyalty by asking if customers would recommend the product. Both offer insights into customer sentiment and areas for improvement.

Customer Health Ratings

Customer Health Ratings are a collection of unique metrics for each organization. They measure how healthy the customer is. This is often represented by usage metrics such as:

Percentage of Users Logged in over the past X days/weeks
Percentage of certain features utilized
Number of customer service cases
Number of unpaid invoices

Often, CS teams will look at the customers that renew and the customers that don’t, try to spot trends, and then aggregate these unique metrics into a simple red, yellow, green ranking for each account.

Onboarding

Onboarding is another form of customer health where metrics will be extremely unique to each organization. To measure it we need to define the onboarding process and select KPIs to measure it. We need an objective way to tell if a customer has been onboarded properly, met or missed key milestones, and/or is behind schedule.

Percentage of customers onboarded on time
Onboarded yes/no
Days since kickoff
Milestones reached/missed

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