NOTQIN — OT Track

SaaS Business Model & Metrics

8 min read

SaaS Business Model & Metrics

The financial and growth language of software-as-a-service. Every investor, CFO, and serious SaaS founder speaks this language fluently.

What Makes SaaS Different

Traditional software (like Microsoft Office pre-2011): one-time license purchase. Revenue is lumpy, hard to predict, no ongoing relationship.

SaaS (Software as a Service): subscription model. Revenue is recurring, predictable, and compounds over time if churn is low. Cloud-hosted, no installation, continuous updates.

Why SaaS dominates now:

  • Customer: lower upfront cost, always up-to-date, accessible anywhere
  • Vendor: predictable revenue, lower piracy, continuous customer relationship, data leverage
  • Investor: recurring revenue is valued at 5–15× ARR (vs 1–2× revenue for traditional software)

The SaaS Unit Economics Mental Model

You acquire a customer for a cost (CAC)
    ↓
The customer pays you monthly (MRR)
    ↓
That revenue continues for an average period (1/Churn Rate)
    ↓
The total value you collect = LTV
    ↓
Your business is healthy if LTV >> CAC
(ideally LTV > 3× CAC, payback < 12 months)

Core SaaS Metrics

Revenue Metrics

MRR — Monthly Recurring Revenue = Sum of all recurring monthly subscription revenue

Not one-time fees, not setup fees, not professional services

ARR — Annual Recurring Revenue = MRR × 12

Used for larger contracts billed annually. If a customer pays MAD 24,000/year, that’s MAD 2,000 MRR.

MRR Decomposition:

New MRR        + Expansion MRR    - Churn MRR     - Contraction MRR   = Net New MRR
(new customers)  (upsells/upgrades) (cancelled)     (downgrades)

Example for SijilPharma:

  • 10 new pharmacies at MAD 199/mo = +MAD 1,990 New MRR
  • 2 pharmacies upgrade to Pro MAD 399/mo (+MAD 200 each) = +MAD 400 Expansion MRR
  • 1 pharmacy cancels (was MAD 199/mo) = -MAD 199 Churn MRR
  • Net New MRR this month = +MAD 2,191

ACV — Annual Contract Value = Total value of one contract over one year. Used in enterprise sales.

TCV — Total Contract Value = Total value of a contract over its entire duration (including multi-year).

Growth Metrics

MoM Growth Rate (Month-over-Month) = (MRR this month – MRR last month) / MRR last month × 100

MoM GrowthImplication
1–3%Slow (12–43% annual)
5–7%Healthy early stage (80–125% annual)
10–15%Exceptional (“triple, triple, double, double”)
20%+Hypergrowth (rare, usually funded)

ARR Growth Targets by Stage:

  • Pre-revenue: not applicable
  • 1M ARR: 3× per year
  • 10M ARR: 2× per year (T2D3 benchmark)
  • 100M ARR: 100% per year
  • $100M+ ARR: 50%+ per year

Customer Metrics

CAC — Customer Acquisition Cost = Total sales + marketing spend / Number of new customers acquired

Example: You spend MAD 5,000/month on LinkedIn ads + MAD 2,000 on a freelancer for content. You acquire 5 new customers. CAC = MAD 7,000 / 5 = MAD 1,400 per customer.

Payback Period = CAC / (MRR per customer × Gross Margin %) = How many months to recover acquisition cost

Target: < 12 months for SMB SaaS, < 18–24 months for Enterprise SaaS. Example: CAC = MAD 1,400. MRR = MAD 199. Gross margin = 80%. Payback = 1,400 / (199 × 0.80) = 8.8 months. ✅

Churn Rate = % of revenue (or customers) lost in a period

Logo Churn = Customers cancelled / Total customers at start of period Revenue Churn = MRR lost from cancellations / MRR at start of period

Monthly Revenue ChurnAnnual Implication
1%~11% annual churn (good for SMB SaaS)
2%~22% annual churn (acceptable)
3–5%~30–45% annual churn (problematic, leaky bucket)
0.5%~6% annual churn (excellent)

Net Revenue Retention (NRR) — the most important SaaS metric = (Starting MRR + Expansion – Contraction – Churn) / Starting MRR × 100

NRRInterpretation
> 130%Best-in-class (Snowflake, Datadog)
> 110%Excellent (negative churn: expansion > churn)
100%Healthy (exactly replacing what you lose)
< 100%Revenue contracting from existing customers

NRR > 100% means your existing customers grow your revenue even if you stop acquiring new ones. This is the holy grail of SaaS.

LTV — Customer Lifetime Value = ARPU × Gross Margin / Monthly Churn Rate

Example: ARPU (Avg Revenue per User) = MAD 250/mo. Gross Margin = 80%. Monthly Churn = 2%. LTV = 250 × 0.80 / 0.02 = MAD 10,000

LTV:CAC Ratio = LTV / CAC

LTV:CACInterpretation
< 1Losing money on every customer
1–3Marginal — grow cautiously
> 3Healthy — invest in growth
> 5Exceptional — accelerate

Engagement Metrics

DAU / WAU / MAU — Daily / Weekly / Monthly Active Users DAU/MAU Ratio (Stickiness): how many monthly users come back daily

  • 20% = good, > 50% = great (WhatsApp), < 10% = concern

Feature Adoption Rate = Users using a feature / Total active users × 100

Time-to-Value (TTV) = Time from signup to first meaningful action (Aha Moment)

NPS — Net Promoter Score Survey: “On a scale 0–10, how likely are you to recommend us to a friend?”

  • 9–10: Promoters, 7–8: Passives, 0–6: Detractors
  • NPS = % Promoters – % Detractors

  • 50 = excellent, > 70 = world-class, < 0 = serious problem

SaaS Pricing Models

Flat Rate

One price, all features. Simple to understand and sell. Less revenue optimization.

Example: SijilPharma Starter at MAD 199/mo regardless of volume.

Tiered Pricing

Multiple plans (Starter/Pro/Enterprise) with feature gates.

STARTER — MAD 199/mo
├── Up to 3 users
├── Basic inventory
└── Standard reports

PRO — MAD 399/mo
├── Unlimited users
├── AI assistant
└── Custom reports + BI

ENTERPRISE — Custom
├── Multi-branch
├── API access
└── SLA + dedicated support

Usage-Based / Consumption Pricing

Pay for what you use. Lower barrier to entry, revenue grows with usage.

Example: NOTQIN IEIA charged per API call or per machine monitored. DigiTPME charged per diagnostic completed.

Per-Seat Pricing

Price per user/seat. Scales with team size.

Example: SijiLab Pro at MAD 150/seat/month. A lab with 10 staff = MAD 1,500/mo.

Freemium

Free tier (limited features/usage) + paid tier.

Best for PLG: DigiTPME Diagnostic — free basic diagnostic, paid detailed report + roadmap.

Value Metric (the key to usage-based pricing)

The one dimension that best correlates with value delivered and scales naturally:

  • SijilPharma: prescriptions processed/month
  • SijiLab: lab requests/month
  • NOTQIN IEIA: machines monitored
  • DigiTPME: diagnostics completed

Rule: price along the value metric to ensure revenue grows as customer success grows.

The Pricing Triangle

         VALUE
        (customer willingness to pay)
         /\
        /  \
       /    \
      /______\
  COST       COMPETITION
  (floor)     (ceiling)

Price must be:

  • Above cost (gross margin positive)
  • Below value (customer sees ROI)
  • Competitive (but differentiated enough to avoid pure price war)

Anchor Pricing: show a higher price first (even if scratched out) to make the real price feel like a bargain. Used in SaaS pricing pages.

SaaS Financial Model Components

Gross Margin

= (Revenue – COGS) / Revenue × 100 COGS in SaaS: hosting, customer support, payment processing, third-party APIs.

SaaS TypeTypical Gross Margin
Pure SaaS (self-serve)70–90%
SaaS + implementation50–70%
SaaS + hardware (IoT)40–60%

NOTQIN (IoT + SaaS): lower gross margins due to hardware COGS. Target 55–65%.

Burn Rate & Runway

Monthly Burn = Cash spent per month Runway = Cash in bank / Monthly Burn

As a bootstrapped founder: minimize burn, extend runway, reach first revenue before external funding needed.

Rule of 40

For growth-stage SaaS: Revenue Growth % + EBITDA Margin % ≥ 40.

  • Hypergrowth (40% growth, -10% margin) = 30% (below threshold, OK if growing fast)
  • Profitable but slow (5% growth, 40% margin) = 45% (healthy)

The SaaS Funnel (from awareness to renewal)

AWARENESS        → SEO, LinkedIn, word-of-mouth, events
ACQUISITION      → Landing page, free trial, freemium signup
ACTIVATION       → Onboarding, Aha Moment, first value delivered
RETENTION        → Habit formation, daily/weekly active use
REVENUE          → Upgrade, upsell, expansion seats
REFERRAL         → NPS promoters invite colleagues, case studies
RENEWAL          → Contract renewal, churn prevention

Leaky Bucket Problem: if you acquire 100 users/month but churn 20%, after 12 months you have fewer users than you think. Fix churn before scaling acquisition.

B2B SaaS in Morocco — Specific Considerations

Payment infrastructure: Stripe not available in Morocco. Alternatives:

  • CMI (Centre Monétique Interbancaire) — local card processing
  • PayDunya / PayTech — African payment gateways
  • Bank transfer (for enterprise contracts)
  • Annual upfront payment reduces CAC amortization problem

Currency: Quote in MAD for local SMEs, USD/EUR for international or CBAM-related clients.

Sales cycles:

  • SMB (pharmacies, small labs): 2–4 weeks
  • Mid-market (hospital groups, factory groups): 2–4 months
  • Enterprise (OCP, Maroc Telecom): 6–18 months

Willingness to pay benchmarks:

  • Moroccan pharmacy owner: MAD 200–500/mo for ERP
  • Moroccan lab director: MAD 500–2,000/mo for LIMS
  • Industrial plant manager: MAD 5,000–20,000/mo for IoT platform
  • SME digital diagnostic: MAD 0 (lead gen) → MAD 500–2,000 for full report

Key SaaS Benchmarks at a Glance

MetricGoodGreatBest-in-Class
MoM Growth5%10%15%+
Monthly Churn< 2%< 1%< 0.5%
NRR100%110%130%+
LTV:CAC> 3×> 5×> 8×
CAC Payback< 12 mo< 9 mo< 6 mo
Gross Margin70%80%85%+
NPS> 30> 50> 70
Activation Rate> 40%> 60%> 80%

See Also

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