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This is the version of Christoph's '9 Worst Practices in SaaS Metrics' as presented by Nicolas Wittenborn at Tech Chill Baltics on February 13, 2014.
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9!Worst Practicesin SaaS Metrics
Christoph Janz!Point Nine Capital
TODAY: !
Nicolas Wittenborn
About me
Associate at Point Nine Capital!I blog (too little) at heyni.co and tweet (too much) at @ncsh
We love SaaS!
A new member
!
9HORROR
worst practices
in SaaS Metrics
Confuse MRR with Cash Inflow(or Bookings or Sales or Revenues)
9worst practice
MRR:• Monthly Recurring Revenue!
• Shows how much revenue you make next month if you don‘t win any new customers (assuming no churn, no upgrades/downgrades, etc.)!
• #1 SaaS metric. Much more important indicator than bookings or cash inflow (but cash inflow pays the bills!)
• 2 customers!
• 1 on a $20/m monthly plan!
• 1 on a $120/y yearly plan!
=> MRR = $30
Example:
Predictable revenue!!
Lifetime value!!
Valuation multiple!
Underestimate churn(by mixing up monthly with yearly plans)
8worst practice
Churn rate
# of customers who churned
# of customers who could have churned
Including customers who can‘t cancel in the denominator screws up your churn estimate!
Don’t forget churn in
your financial plan!
7worst practice
Ignore your cohorts
Cohort analyses are the only way to get a good understanding of retention and customer lifetimes
Image source: Change in
retention over product lifetime
Retention over user lifetime
Don‘t track each step of the conversion funnel
worst practice
6
ttention
nterest
esire
ction
AARRR!Acquisition
Activation
Retention
Referral
Revenue
Visitors
Free Trial Signups
PayingCustomers
Visitor-to-Trial Conversion Rate
Trial-to-Paying!Conversion Rate
Retention Rate!and Account Expansions
Referrals
Mix up visitors to your marketing website with users of your software
worst practice
5
0,00%$
0,50%$
1,00%$
1,50%$
2,00%$
2,50%$
3,00%$
3,50%$
4,00%$
4,50%$
5,00%$
0$
200$
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600$
800$
1000$
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1600$
1800$
1$ 2$ 3$ 4$ 5$ 6$
Visits$ Signups$ Signup$Rate$
0,00%$
1,00%$
2,00%$
3,00%$
4,00%$
5,00%$
6,00%$
0$
200$
400$
600$
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1000$
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1400$
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1$ 2$ 3$ 4$ 5$ 6$
Signups$ Website$visits$ Signup$Rate$
Show CACs on a blended basis only
4worst practice
(mixing up paid and non-paid sources of leads)
• 100 customers @ $0 per customer!
• 20 customers @ $500 per customer
average CACs of $83.33, but !
the average is pretty meaningless
Example:
Catch the low-hanging fruits, just don‘t expect them to scale!
Attribute all conversions to your sales team
3worst practice
Find out how well your signups are converting without being called by a salesperson. !!A/B test and calculate the ROI on your sales investments based on the conversion uplift.
Vice versa: Maybe it’s
not the sales person?
Assume you‘re growing exponentially
2worst practice
• True exponential growth is very, very rare in SaaS – requires virality which most SaaS products don‘t have!
• Most SaaS companies grow linearly and with step changes!
• Even a modest exponential growth rate of 10% p.m. is very hard to sustain for a longer period of time
Reading exponential growth into linear growth numbers can lead to wrong conclusions
GAIL GOODMAN: !
THE LONG, SLOW,
SAAS RAMP OF DEATH
Don‘t start tracking KPIs until investors request it
1worst practice
• Many metrics are actionable – they tell you what to focus on, when to invest in acceleration, etc.!
• Metrics help you focus your team on what matters most!
• Investors want historic numbers, not just a snapshot
Because...
