Summary:

Dave Jackson discusses the importance of Net Revenue Retention (NRR) as a measure of growth from an existing customer base. He mentions that while some people include new sales in their NRR calculations, he personally prefers to focus on renewal and expansion revenues. However, he emphasizes that NRR doesn't provide insights into the costs incurred to achieve that revenue. As a former CEO and founder, he stresses the significance of understanding costs because, in the short term, cash flow is vital, and in the long term, profitability becomes a crucial driver for business and its valuation. While he sees the value in measuring and regularly reporting NRR, he believes it's not a comprehensive measure due to its lack of a cost element.

Our Thoughts:

Dave Jackson's insights into the limitations of Net Revenue Retention (NRR) shed light on a critical aspect of business metrics that is often overlooked. While NRR is undeniably a valuable metric for understanding customer loyalty and growth, Jackson's emphasis on the importance of cost considerations is a timely reminder for businesses.

In the fast-paced world of startups and growing businesses, there's a tendency to focus on growth metrics that paint a rosy picture. However, as Jackson rightly points out, understanding the costs behind these numbers is equally, if not more, important. After all, a business that grows its revenue without a clear understanding of its costs can quickly find itself in financial trouble.

Jackson's perspective as a former CEO and founder adds weight to his argument. Those at the helm of companies are not just looking at growth; they're looking at sustainable and profitable growth. The distinction between these two is crucial. While it's impressive to boast high NRR figures, if those numbers come at an unsustainable cost, they can be misleading.

In conclusion, Dave Jackson's thoughts serve as a crucial reminder for businesses to look beyond surface-level metrics. While NRR is a valuable tool in the arsenal of business metrics, it should be complemented with a deep dive into the costs associated with achieving that growth. Only then can businesses truly understand their trajectory and make informed decisions for the future.