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UsingMetricstoTriageYourSubscriptionBusiness
Welcome- 30Secondsaboutus.
ChrisWeberProductManager,SaaSOptics
Ø FullSubscriptionManagementwith• SaaSFinancials• SaaSMetrics
Ø Over300customersØ Customershavecollectivelyraised~$2BinVCandPEØ Untoldhoursofduediligenceandauditscrutiny
PollingQuestion:
ØWhatisthesizeofyourcompanyinARR?Ifyou’reanoutsourcedCFOorauditor,whatisyouraverageclientsize?q$0- $5MMq$6MM- $10MMq$10- $15MMq$15- $20MMq$20MMplus
Agenda
Ø LimitationoftraditionalfinancialstatementsØ HierarchyofSaaSMetricsØ VanityvsActionableMetricsØ Gettingaheadoftheissue:triagingyourSaaSMetrics
WhySoftwareasaService?
Ø AnnuityStreamØ Lowchurn/highrenewalratesresultinhighcustomerlifetimevaluesØ TypicallyhighgrossmarginØ EfficientR&Dspend
• FocusonSales&Marketing:CustomerAcquisitionCost(CAC)Ø CustomercentricapproachØ Innovative&adaptable
WhySoftwareasaService?
Ø AnnuityStreamØ Lowchurn/highrenewalratesresult
inhighcustomerlifetimevaluesØ TypicallyhighgrossmarginØ EfficientR&Dspend
• FocusonSales&Marketing:CustomerAcquisitionCost(CAC)
Ø CustomercentricapproachØ Innovative&adaptable
KeyFinancialData:
Ø Budget/Projections• Assumptions
Ø HistoricalIncomeStatementØ BalanceSheetØ CashBurnRate&Runway
LimitationsofFinancialStatements
Ø Revenue(P&L)• Reliability• Composition(beyondincomeaccounts)§ New
§ Expansion
§ Contraction
§ Lost
• Momentum§ Trends&Velocities
o CohortAnalysis;customerclass,salesrep,producttype,etc.
BridgingtheGap
Ø CAC:CustomerAcquisitionCostØ LTV:LifetimeValueØ LTV/CACRatioØ CACPaybackPeriodØMagicNumber
ØMRR/ARRGrowthRatesØ SaaSQuickRatioØ Bookings(ACV&TCV)Ø Churn(Logo&$)Ø Expansion&ContractionMRR/ARR
http://www.saasoptics.com/saaspedia
HierarchyofMetrics
15M+ ARR5M - 15M ARR1M – 5M ARR0-1M ARR
Top of Mind
• Invoicing/Billing• Cash• Product Fit
• Initial Funding• Converting to
accrual• Metrics• Renewal Base
• Additional capital requirements
• Revenue Recognition
• Metrics
• Additional capital requirements
• Larger audit engagements
• Advance metrics
HierarchyofMetrics
CAC (Cost to Acquire a Customer) Churn: Dollar & Customer
Lifetime value (LTV)LTV / CAC Ratio
SaaS Quick Ratio Churn Cohort Analysis• Sales Rep• Vertical• Period Won• Term• Item or Item Groups
MRR Cohort Analysis• Sales Rep• Vertical• Period Won• Term• Item or Item Groups
Qty (Seats) Cohort Analysis• Sales Rep• Vertical• Period Won• Term• Item or Item Groups
LTV: Discount Rate Applied
Customer Retention Rate (CRR)
Dollar Retention Rate (DRR)
LTV / CAC RatioCAC Payback Period Expenses /
FTE
MRR * Gross Margin / FTEChurn:• Net• Expired• Canceled
Bookings (TCV) MRR / ARR Customer (logo) Count
Backlog Employee CountSubscription Momentum
15M+ ARR5M - 15M ARR1M – 5M ARR0-1M ARR
PollingQuestion:
ØWhatmetricsoranalyticsreportsdoyourun?q Churnandretentionanalysisq CLVq Cohortq SubscriptionMomentumq Noneoftheabove
VanityvsActionableMetricsAug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17
TotalARR 6,028,860 6,676,133 7,867,164 9,116,822 10,013,362 10,329,418 12,143,167 12,813,996 13,160,562 13,410,685 13,798,064 13,859,763CustomerCount 490 526 574 598 658 668 694 722 748 775 810 821
MonthlyCustomerChurnRate 0.95% 0.80% 0.53% 0.51% 0.50% 0.55% 0.56% 0.67% 0.72% 0.70% 0.62% 1.09% PeriodtoPeriodNetGrowthRate 8.13% 8.41% 7.35% 9.13% 4.18% 10.03% 1.52% 3.89% 4.03% 3.60% 3.61% 4.52%
MonthlyARRChurnRate 1.28% 1.32% 2.54% 1.27% 0.86% 1.07% 1.31% 2.26% 0.55% 0.82% 0.40% 3.38% EffectiveARRRetentionRate 112.10% 103.15% 110.62% 111.34% 100.74% 100.66% 114.72% 102.56% 100.11% 99.41% 99.98% 96.67%
AverageARRofNewDeal 12,969 12,366 10,044 14,295 13,592 19,257 10,468 10,906 11,081 9,922 10,853 12,715AverageCLV 108,427 131,682 214,725 251,551 254,021 232,914 259,544 221,849 204,848 204,946 229,693 129,330AverageCAC 111,628 162,162 114,583 280,000 131,148 76,923 39,286 36,364 40,000 36,364 33,333 29,268
CLVtoCACRatio97% 81% 187% 90% 194% 303% 661% 610% 512% 564% 689% 442% 0.97 0.81 1.87 0.9 1.94 3.03 6.61 6.1 5.12 5.64 6.89 4.42
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-1
7
TotalARR
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-1
7
CustomerCount3.38%
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-1
7
MonthlyARRChurn
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-1
7
CLV/CACRatio
VanityvsActionableMetricsAug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17
TotalARR 6,028,860 6,676,133 7,867,164 9,116,822 10,013,362 10,329,418 12,143,167 12,813,996 13,160,562 13,410,685 13,798,064 13,859,763CustomerCount 490 526 574 598 658 668 694 722 748 775 810 821
MonthlyCustomerChurnRate 0.95% 0.80% 0.53% 0.51% 0.50% 0.55% 0.56% 0.67% 0.72% 0.70% 0.62% 1.09% PeriodtoPeriodNetGrowthRate 8.13% 8.41% 7.35% 9.13% 4.18% 10.03% 1.52% 3.89% 4.03% 3.60% 3.61% 4.52%
MonthlyARRChurnRate 1.28% 1.32% 2.54% 1.27% 0.86% 1.07% 1.31% 2.26% 0.55% 0.82% 0.40% 3.38%
EffectiveARRRetentionRate 112.10% 103.15% 110.62% 111.34% 100.74% 100.66% 114.72% 102.56% 100.11% 99.41% 99.98% 96.67%
AverageARRofNewDeal 12,969 12,366 10,044 14,295 13,592 19,257 10,468 10,906 11,081 9,922 10,853 12,715AverageCLV 108,427 131,682 214,725 251,551 254,021 232,914 259,544 221,849 204,848 204,946 229,693 129,330AverageCAC 111,628 162,162 114,583 280,000 131,148 76,923 39,286 36,364 40,000 36,364 33,333 29,268
CLVtoCACRatio97% 81% 187% 90% 194% 303% 661% 610% 512% 564% 689% 442% 0.97 0.81 1.87 0.9 1.94 3.03 6.61 6.1 5.12 5.64 6.89 4.42
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-1
7
TotalARR
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-1
7
CustomerCount3.38%
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-1
7
MonthlyARRChurn
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-1
7
CLV/CACRatio
Scheduled Billings
ProjectedBillings:
98.5% Renewal Rate
ProjectedBillings:
95% Renewal Rate
$584,502
CashFlowImpact:
TriageYourBusiness
SubscriptionMomentum:
Ability to drill down into these customer records to triage our metrics.
ARRCohortbyOrderDate(Quarter)
ARRCohortbyOrderDate(Quarter)EffectiveARRRetention over
customerlifetime
Changeinretentionovertime
SalesRepCohort:RelativeMonths(ARR)
Ø SmithandChrisWeber:TwoofourlongesttenureandhistoricallyperceivedasourbestrepsareactuallyresponsibleforthemajorityoftheARRchurn.Possiblysellingdealsthatarenotagoodfitandweshouldrevisittheirtraining.Ournewerlessexperiencedrepsappeartobesellingdealsthatcontinuetoexpandupontheir12monthrenewal.
HierarchyofMetrics:Actionable
CAC (Cost to Acquire a Customer) Churn: Dollar & Customer
Lifetime value (LTV)LTV / CAC Ratio
SaaS Quick Ratio Churn Cohort Analysis• Sales Rep• Vertical• Period Won• Term• Item or Item Groups
MRR Cohort Analysis• Sales Rep• Vertical• Period Won• Term• Item or Item Groups
Qty (Seats) Cohort Analysis• Sales Rep• Vertical• Period Won• Term• Item or Item Groups
LTV: Discount Rate Applied
Customer Retention Rate (CRR)
Dollar Retention Rate (DRR)LTV / CAC Ratio
CAC Payback Period Expenses / FTE
MRR * Gross Margin / FTEChurn:• Net• Expired• Canceled
Bookings (TCV) MRR / ARR Customer (logo) Count
Backlog Employee CountSubscription Momentum
$0MM – $100+MM
Cloud-basedSubscriptionManagementforGrowingB2BSaaSBusinesses
