Essential GTM Formulas

Essential GTM Formulas

The math behind winning startups. These aren't just metrics—they're decision frameworks used by elite founders to scale from zero to IPO.

PMF Score (Sean Ellis Framework)

The ultimate litmus test: Do users love this? Measure via "Would you be very disappointed if this product disappeared?"

Formula: PMF = % users who would be very disappointed > 40%

Zones:

  • 0-20%: Nobody cares
  • 20-40%: Maybe... keep iterating
  • 40%+: PMF Achieved

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Startup Velocity = Experiments × Impact

Your speed of learning and execution. More experiments with higher impact per test = faster PMF discovery.

Formula: Velocity = (Experiments/week) × (Avg impact/experiment)

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LTV:CAC Ratio

The fundamental unit economics test. Every dollar spent acquiring customers should return at least $3 in lifetime value.

Formula: LTV:CAC = Customer Lifetime Value / Customer Acquisition Cost

Benchmarks:

  • < 1: Unsustainable - losing money
  • 1-3: Fundable but risky
  • 3+: Scalable economics

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Revenue Efficiency = Net New ARR / Burn

How efficiently are you converting cash into growth? The jet engine vs bicycle metaphor.

Formula: Efficiency = Net New ARR / Monthly Burn Rate

Zones:

  • < 0.5: Unscalable (bicycle)
  • 1.0: Fundable
  • > 1.5: Takeoff Mode (jet)

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Referral Coefficient (K-Factor)

The viral loop metric. Each user brings more users. K>1 = exponential growth.

Formula: K = (Invites/user) × (Conversion rate)

States:

  • K < 1: Death spiral - every cohort shrinks
  • K = 1: Static - replacement rate only
  • K > 1: Exponential growth - each cohort compounds

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T2D3 Model Growth Curve

The SaaS hypergrowth blueprint: Triple, Triple, Double, Double, Double. $1M → $36M in 5 years.

Formula: Year 1: $1M → Year 2: $3M → Year 3: $9M → Year 4: $18M → Year 5: $36M

Milestones:

  • Year 1: $1M
  • Year 2: $3M, 3x
  • Year 3: $9M, 3x
  • Year 4: $18M, 2x
  • Year 5: $36M, 2x

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