What if PE Were Built Like SaaS: ARR, Churn, CAC, and Operating Margins
What if a fund had an LTV:CAC ratio?
Would you raise another fund or shut it down?
Private equity loves to run portfolio companies like SaaS businesses.
Dashboards. Monthly metrics. Efficiency ratios.
But the PE firm itself? It’s often flying blind by comparison.
Let’s play this out:
• ARR = Management Fees
Predictable, recurring revenue. Just like SaaS, this should fund your G&A, ops, and platform team. If you’re burning through it to chase the next fundraise...... that’s not scale, that’s subsidy.
• CAC = Cost to Raise and Deploy Capital
All the GP roadshows, broken deals, diligence, operating resources. How much are you actually spending to win and support each deal? In SaaS, high CAC without payback gets you fired. In PE, it often gets hand-waved as “the cost of doing business.”
• LTV = Fees + Carry over Time
What’s the value of a deal or LP relationship over its full lifecycle? Are you building long-term monetization, or is the model leaky and overreliant on constant fundraising?
• Churn = LP turnover, deal attrition, partner exits
No SaaS investor ignores churn. It’s the silent killer. But in PE? It’s rarely even tracked.
• Net Revenue Retention = Follow-ons and bolt-ons
Smart SaaS investors love companies that grow within their existing base. In PE, the equivalent is expanding the equity story through strategic M&A or operational compounding. Same principle, just less tidy.
The irony? If many PE firms were SaaS businesses, no one would invest in them.
Too much CAC. Too little LTV. Margin structures that would make a CFO weep.