If you’re in tech and don’t understand these metrics, you’re flying blind.

You might grow a company quickly without understanding how. But you'll never scale one that way.

These key metrics separate sustainable growth from unsustainable expansion. Having worked closely with RevOps, finance leaders, and C-suite executives throughout my career, I've seen firsthand how mastering these numbers transforms good operators into strategic business partners.

These metrics aren't just for leadership. If you work in tech across GTM, product, RevOps, partnerships, or customer success, you need to understand them. They're how you know if the business is growing in the right way, not just getting bigger without getting better.

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LTV:CAC Ratio – Are you growing sustainably?

This ratio is often mentioned, but it remains fundamental. It's also my favourite metric to slip into job interviews – the good candidates know it, the great ones admit when they don't but show eagerness to learn, and those to avoid will bluff their way through.

Essentially, the LTV:CAC Ratio compares the lifetime value of a customer (LTV) with the cost it took to acquire them (CAC). This ratio shows whether your customer acquisition strategy is economically viable. If you're spending more to acquire customers than they'll ever bring in revenue, you're heading for trouble.

Basic formula:

LTV = average monthly revenue × gross margin × customer lifespan

CAC = total cost to acquire a new customer

Example:

The customer pays £1,000 per month

Gross margin is 75%

The average lifespan is 36 months

→ LTV = £1,000 × 36 × 0.75 = £27,000

If CAC is £9,000, then LTV

What to aim for:

3:1 is strong

Below 2:1 is risky

Above 5:1 might mean you're under-investing in growth and could spend more to capture market share.

When it's useful:

When your pricing, churn, and margin are relatively stable, it's a board-level signal for scalability.

When it's not:

If you've just launched, don't have retention data, or your pricing model keeps changing, it can become messy and cause everyone headaches.

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Magic Number – Are we spending efficiently on growth?

The Magic Number shows how well your sales and marketing spend is converting into new recurring revenue. It's one of the quickest ways to see if your GTM model is working effectively.

Basic formula:

(New ARR this quarter – ARR last quarter) ÷ previous quarter's sales and marketing spend

Example:

ARR in Q1 = £4.6m

ARR in Q2 = £5.2m

→ New ARR = £600k

Q1 S&M spend = £700k

→ Magic number = 600 ÷ 700 = 0.86

What to aim for:

0.75 or above means GTM spend is working

Below 0.5 means something's broken

Over 1.0 is excellent

When it's useful:

If you have short sales cycles and predictable revenue recognition.

When it's not:

In long enterprise sales cycles where ARR lags significantly behind spend.

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Net Revenue Retention – Are customers growing with us?

Net Revenue Retention (NRR) shows how much existing customer revenue you keep and expand. It's one of the clearest indicators of product-market fit and long-term value creation.

Basic formula:

(Start-of-period revenue + expansion – churn – contraction) ÷ start-of-period revenue

Example:

Starting MRR = £100k

Expansion = £20k

Churn = £10k

→ NRR = (100 + 20 – 10) ÷ 100 = 110%

What to aim for:

Over 100% = strong expansion and retention

90–100% = steady, but flat

Below 90% = problem that needs immediate attention

When it's useful:

Once you've been through a few renewal cycles or have established expansion revenue.

When it's not:

If there's no upsell motion or you only have fixed pricing.

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CAC Payback Period – How long until we stop losing money?

CAC payback tells you how long it takes to recover the cost of acquiring a customer. It's not about theoretical value – it's about when you actually break even on your customer acquisition investment.

Basic formula:

CAC ÷ gross margin per customer per month

Example:

CAC = £9,000

Gross margin per month = £750

→ Payback = 12 months

What to aim for:

Less than 12 months = very healthy

12–18 months = fine if cash reserves are available

Over 18 months = dangerous unless NRR is high

When it's useful:

Always. Especially when planning headcount, territory expansion, or calculating runway.

When it's not:

If margin is unclear or customer value is too inconsistent across segments.

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Sales efficiency – Are we getting a return on GTM?

Sales efficiency gives a broader, longer-term view of GTM performance than the magic number. It tells you how much ARR you're generating per £1 spent.

Basic formula:

Net new ARR ÷ total S&M spend

Example:

Net new ARR = £2.4m

Sales and marketing spend = £1.8m → Sales efficiency = 1.33

What to aim for:

Over 1.0 = good

Over 1.5 = strong

Below 0.8 = something’s not working

When it’s useful:

Strategic planning, regional comparisons, and board-level conversations.

When it’s not:

If the GTM model or spend mix has changed dramatically mid-year.

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Beyond dashboards: Why these metrics matter

Throughout my career, I've seen the difference between teams that optimise for metrics and teams that optimise for business outcomes. The best leaders, whether in marketing, sales, product, or operations, think like investors. They understand how their daily decisions impact these core metrics and, ultimately, the company's valuation.

As markets tighten and capital efficiency becomes paramount, the ability to connect functional expertise with financial outcomes isn't just valuable, it's essential. The most strategic contributors don't just execute their function well; they understand how their work creates lasting business value.

Whether you're leading a team, considering joining a startup, or evaluating an investment opportunity, these metrics provide the framework for distinguishing between growth and value creation.

After all, if you're not tracking the right things, you're not scaling—you're guessing.