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The Twenty Minute VCDave Kellogg: How to Forecast in 2024 & Why CaC Payback is Flawed and CAC Ratio is Better | E1110
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At a glance
WHAT IT’S REALLY ABOUT
Dave Kellogg Redefines SaaS Efficiency: CAC, Forecasting, CS, and AI
- Dave Kellogg, veteran SaaS operator and advisor, explains how to think about efficient growth in today’s tougher funding and buying environment, emphasizing simple, “atomic” metrics like CAC ratio over compound metrics like CAC payback period. He argues that most startups underuse basic analytics to double down on what’s working and misunderstand key concepts like ICP, retention, and sales efficiency. Kellogg dives deep into forecasting (new sales vs. churn), the real job of customer success, the dangers of sloppy outbound, and how to structure sales organizations, incentives, and close plans. He closes with views on AI in sales, the outbound arms race, and why subscription pricing and founder idolatry have both become problematic ‘religions’ in SaaS.
IDEAS WORTH REMEMBERING
5 ideasUse CAC ratio as your core efficiency metric, not CAC payback period.
Kellogg prefers CAC ratio (sales & marketing spend / new ARR) because it’s simple, hard to fudge, and isolates sales and marketing efficiency, whereas CAC payback folds in gross margin and churn, making it useful for VC screening but less useful for operators trying to diagnose and fix specific problems.
Evolve your ICP from aspiration to regression as you scale.
Early on, ICP is a hypothesis about who should buy (company–buyer–problem); over time it must become data-driven—using win rates, deal cycles, ASP and NRR to find the segments where you sell faster, retain longer, and expand more, then doubling down there.
Separate ‘atomic’ metrics for operating from ‘compound’ metrics for investing.
Operators should rely on single-purpose metrics (e.g., CAC ratio, gross margin, NRR, GRR) to pinpoint issues, while investors can use compound metrics like CAC payback and net new ARR growth to quickly screen companies—mixing them leads to confusion and easier number-fudging.
Redefine customer success as an explicitly commercial, revenue-responsible function.
Kellogg argues that CS teams often drift into ‘hugger’ or pseudo-support roles; instead they should introduce themselves as account owners whose job is to secure renewals and grow the account, work a portfolio to a target NRR, and share upsell credit with sales to reduce channel conflict.
Run disciplined, triangulated sales forecasting and avoid ‘club’ forecasts.
Forecasts should be each rep’s honest prediction, rolled up across reps, managers, and multiple views (stage-weighted pipeline, forecast categories, historical conversion rates) to triangulate; managers who bully reps into inflated ‘commit’ numbers destroy forecast accuracy and decision quality.
WORDS WORTH SAVING
5 quotesICP starts out as an aspiration, and over time it becomes a regression.
— Dave Kellogg
I like what I call atomic metrics, because I'm looking at one thing, it's harder to cheat, and I know exactly what I'm looking at.
— Dave Kellogg
My name is Dave. I'm your account manager. My job is to get your renewal and grow your account.
— Dave Kellogg
The single biggest sin in SaaS is putting your farmer against someone else’s hunter.
— Dave Kellogg
We’ve learned how to do inefficient growth really well in the last four years.
— Dave Kellogg
High quality AI-generated summary created from speaker-labeled transcript.
