The key SaaS metrics that matter to smb owners
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Transcript of The key SaaS metrics that matter to smb owners
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p2
Branden HarperDirector of Lighter Capital
+10 years financing early stage tech companies, either
as an entrepreneur or investor. Over $50M raised or invested
Today’s Speakers
David RyanFounder of SaaSOptics
A serial early-stage entrepreneur with 20+ years of experience. Built 8 companies
that span the spectrum of enterprise and SaaS.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015
› Founded in 2009
› 150+ SaaS customers
› $880 MM in TTM revenue
Trusted by:
About SaaSOptics
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015
› Mission: make fundraising process more efficient utilizing technology and alternative structures
› Funded +80 tech companies: Most active revenue-based finance lender in the country
› $50K-$1M in growth capital, including making key hires, product development and sales/marketing initiatives
› Entrepreneur-aligned structure
About Lighter Capital
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015
Today’s Agenda
Why track subscription metrics?
The 5 Principles of SaaS Analytics
Key metrics you should focus on and how they apply towards different business models and stages
p5
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p6
Subscription Metrics & Terminology
The Big 5MRR
Family(MRR. CMRR,
ARR/ACV)
Churn CAC
Cohorts CLV
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p7
Why Subscription Metrics?
Reason 1: Traditional financial reports don’t tell the whole story
Reason 2: For better operating decisions:
Income Statement
Balance Sheet
GAAP
MRR
CLV
Metrics Pricing Packaging
DevelopmentCompensatio
n
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p8
The 5 Principles SaaS Analytics
1. There are no rules
2. You make the rules
3. You must speak “subscription metrics” to speak with the capital markets
4. Analyze by segmentation
5. Know your subscription business model
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p9
Which Model Are You
B2C
High Transaction Volume
Low Transaction Price
Unassisted Buying
Click Acceptance
Monthly Credit Card Payments
B2B
Low Transaction Volume
High Transaction Price
Selling
Negotiated Agreement
Checks/ACH/Wires
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Where are you?
Self-Funded
Angel Investors
Series A
Series B
Series C
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p11
#1 - MRR‣ MRR= Monthly Recurring Revenue
‣ But, MRR is not “revenue.” It is a “normalized approximation” of revenue
‣ MRR figures into almost all subscription metrics and analysis, so you must track it granularly and accurately!
‣ Know the elements of your MRR
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MRR Variants‣ CMRR= Committed Monthly Recurring Revenue
‣ Use when this is a gap between contract execution and subscription start date
‣ B2B Only
‣ ARR= Annual Recurring Revenue and = 12x MRR
‣ B2B Only
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p13
#2 Churn‣ Churn = what is lost
‣ Customers lost
‣ MRR/ARR lost
‣ Reported in whole numbers
‣ Reported in ratios
‣ Speaks to sustainability and company valuation
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p14
Customer Churn & MRR Drive Valuations!
‣ Average Customer Lifetime Value = Average MRR X Gross Margin / Customer Churn Rate + Monthly Discount Rate
‣ Total Lifetime Value = Average Customer Lifetime Value x Customer Count End of Period
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p15
#3 Cohort‣ A Cohort is a “like group”
‣ Cohort analysis provides a sense of relative performance across different groups
‣ In subscriptions, the cohort is usually the month the customer was acquired, but a cohort can be any meaningful group
‣ Industry can be a cohort!
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p16
#4 Customer Lifetime Value (CLV)‣ Customer Lifetime Value is the estimated value of your existing Customer
subscriptions.
‣ Average Customer Lifetime Value = (Average MRR X Gross Margin)/(Customer Churn Rate + Monthly Discount) Rate)
‣ Total Lifetime Value = Average Customer Lifetime Value X Customer Count End of Period
‣ Grows in importance as your business matures
#5 Customer Acquisition Cost (CAC)‣ CAC = Cost of Acquiring a Customer
‣ Works hand-in-hand with CLV
‣ Grows in importance as your business matures
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Which Metrics Are Important When?
Self-Funded
Angel Investors
Series A
Series B
Series C
Cohort, CAC, CLV
MRR, Churn
B2B
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p18
Which Metrics Are Important When?
Self-Funded
Angel Investors
Series A
Series B
Series C
Cohort, CAC, CLV
MRR, Churn
B2C
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015
How Can We Help?
Lighter CapitalProvides $50K-$1M growth funding to SaaS companies
› Non dilutive
› Long-term growth capital
› Flexible payments
› Can get you funded in 30 days
SaaSOpticsComplete B2B Subscription Management Software
› Subscription Invoicing
› Revenue recognition and deferred revenue
› Subscription Analytics
› Subscription Management
Learn more: www.lightercapital.com
Contact us: [email protected]
Learn more: www.saasoptics.com
Contact us: 678.710.8260