The 3 High 3 Low Metrics Framework

The 3 High 3 Low Metrics Framework

The "3 High/3 Low" framework is a simple yet powerful way to track the six most important leading indicators of a SaaS business's health. These metrics provide a dashboard that helps you understand the drivers behind your North Star metrics and predict when your growth might plateau.

The goal is to keep the "High" metrics as high as possible and the "Low" metrics as low as possible.

The 3 High Metrics (Maximize These)

  1. Trial-to-Paid Conversion Rate:

    • What it is: The percentage of free trial users who become paying customers.
    • What it tells you: The effectiveness of your onboarding process and the perceived value of your product.

  2. Average Revenue Per Account:

    • What it is: The average amount of monthly revenue you receive per customer.
    • What it tells you: The overall value of your average customer. A higher Average Revenue Per Account unlocks more expensive marketing channels.

  3. Lifetime Value of a Client:

    • What it is: The total amount of revenue you can expect to generate from a single customer before they churn.
    • What it tells you: The long-term health and profitability of your business model.

The 3 Low Metrics (Minimize These)

  1. Customer Churn:

    • What it is: The percentage of customers who cancel their subscription in a given period.
    • What it tells you: Whether your product is retaining users and delivering on its promise over the long term. High Churn is a major red flag.

  2. Customer Acquisition Cost (Customer Acquisition Cost):

    • What it is: The total cost of sales and marketing required to acquire a single new customer.
    • What it tells you: The efficiency of your marketing and sales engine.

  3. Customer Acquisition Cost Payback Period:

    • What it is: The number of months it takes to earn back the cost of acquiring a customer.
    • What it tells you: The capital efficiency of your business. A shorter payback period means you can reinvest cash into growth more quickly.

These six metrics are often in tension with each other (e.g., lowering Customer Acquisition Cost might also lower Average Revenue Per Account). The founder's job is to manage this tension and optimize the overall health of the system.

Tags: #SaaS #metrics #KPI #framework #churn #LTV #CAC #ARPA #conversion