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ARR bridge and efficiency of a SaaS company in Chennai

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

A SaaS company based in Chennai, India, sells customer support software to small businesses worldwide and reports in USD. It starts the year with USD 50 million of ARR. During the year it wins USD 15 million of new ARR, existing customers add USD 6 million through upgrades and more users, and it loses USD 4 million to churn and downgrades. Sales and marketing spend to win the new customers was USD 18 million, and gross margin is 80 percent. Its free cash flow margin is 5 percent. Calculate ending ARR, growth, NRR, CAC payback, and the rule of 40.

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

SaaS health check
- ARR bridge: start + new + expansion minus churn = end
- NRR = (start + expansion minus churn) / start
- CAC payback = acquisition spend / (new ARR x gross margin), in months
- Rule of 40 = growth + free cash flow margin

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Ending ARR
What a strong candidate does: 50 plus 15 plus 6 minus 4.
Ending ARR (USD millions): 50 + 15 + 6 - 4 = 67
Step 2: ARR growth
What a strong candidate does: Increase of 17 on a start of 50.
ARR growth (percent): (67 - 50) ÷ 50 × 100 = 34
Step 3: Net revenue retention
What a strong candidate does: Existing customers only: 50 plus 6 minus 4, divided by 50.
NRR (percent): (50 + 6 - 4) ÷ 50 × 100 = 104
Step 4: CAC payback
What a strong candidate does: New ARR of 15 brings 12 of gross profit a year, which is 1 a month. Spend of 18 is repaid in 18 months.
CAC payback (months): 18 ÷ (15 × 0.8) × 12 = 18
Step 5: Rule of 40
What a strong candidate does: Growth of 34 plus a free cash flow margin of 5.
Rule of 40 score: 34 + 5 = 39

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

The company should focus on raising net revenue retention, because it grows 34 percent with NRR of 104 percent but scores 39 on the rule of 40, just under the healthy mark. First, it lost USD 4 million of ARR to churn and downgrades among its small-business customers. Second, lifting NRR from 104 to 110 percent would add USD 3 million of ARR a year without extra acquisition spend, while CAC payback is already about 18 months, longer than the roughly 12 months often called good. The risk is that small businesses churn more in a downturn. As a next step, track churn and upgrades by customer cohort each month.

Risks a strong answer names: Small-business customers churn more in a downturn; Growth from new customers may slow as marketing gets more expensive; Currency moves affect the rupee cost base against USD revenue.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.