I think historical accounting practices and standards are not great at evaluating SaaS businesses.
We came up with the concept of depreciation/amortization as a way to better match up expenses with revenues in a given time frame.
I think we need a similar mechanism for allocating sales & marketing costs.
My company spends about $1,000/year on Slack. We likely will in perpetuity, as long as we/Slack exists.
Slack spent marketing/CAC dollars on us all the way back in 2014 to acquire our LTV stream of cash flows.
If you "depreciated" Slack's sales and marketing costs ($104M, $140M, $223M) over the LTV of the average customer, they would show massive profitability already, and even greater profitability in the future.
We do this already with depreciation - why not with sales and marketing for recurring revenue software companies?
We came up with the concept of depreciation/amortization as a way to better match up expenses with revenues in a given time frame.
I think we need a similar mechanism for allocating sales & marketing costs.
My company spends about $1,000/year on Slack. We likely will in perpetuity, as long as we/Slack exists.
Slack spent marketing/CAC dollars on us all the way back in 2014 to acquire our LTV stream of cash flows.
If you "depreciated" Slack's sales and marketing costs ($104M, $140M, $223M) over the LTV of the average customer, they would show massive profitability already, and even greater profitability in the future.
We do this already with depreciation - why not with sales and marketing for recurring revenue software companies?