SaaS Metrics for Dummies

This talk was first presented on the 7th April 2016. http://www.deanhume.com

Presentation Details
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This presentation is an overview of the key metrics that are needed to understand and optimize a SaaS business. It runs though how SaaS businesses are different to the traditional business model and dives into the basic key metrics of SaaS businesses.

This talk is aimed at helping anyone involved in a SaaS business understand which variables really make a difference, and how to measure them and act on the results.

Transcript

1. SaaS Metrics for Dummies
2. ?
4. What is SaaS?
6. What is SaaS? A licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted
7. 3 Key Areas
8. 3 Key Areas 1. Acquiring Customers
9. 3 Key Areas 1. Acquiring Customers 2. Retaining Customers
10. 3 Key Areas 1. Acquiring Customers 2. Retaining Customers 3. Monetizing Customers
11. 1. SaaS is different This Talk
12. 1. SaaS is different 2. Key Metrics This Talk
13. 1. SaaS is different 2. Key Metrics 3. How to determine Success This Talk
14. 1. SaaS is different
15. Cash Flow
18. What happens if we add more Customers?
20. “Mo money, mo problems”
21. SaaS metrics FTW!
22. 2 . SaaS Metrics
23. 3 Metrics 1. Cost of acquiring a customer
24. 3 Metrics 1. Cost of acquiring a customer 2. Lifetime value of a customer
25. 3 Metrics 1. Cost of acquiring a customer 2. Lifetime value of a customer 3. Months to recover CAC
27. CAC
28. CAC Cost of acquiring a Customer
30. CAC = All expenses Cost to Acquire Customer
31. CAC = $3,033 Acme Corp.
32. Customer Lifetime
33. Customer Lifetime = 1 Customer Churn Rate Customer Lifetime
34. Customer Lifetime = 1 20% Acme Corp.
35. Customer Lifetime = 5 years Acme Corp.
36. LTV
37. LTV Lifetime value of a customer
38. LTV = Average MRR * Gross Margin LTV Monthly Churn Rate
39. LTV = $2,225 * 60% LTV 20%
40. LTV = $6,675 Acme Corp.
41. Months to recover CAC
42. Months = CAC MRR * Gross Margin Months to Recover CAC
43. Months = $3,033 $2,225 * 60% Months to Recover CAC
44. Months = 2.2 Acme Corp.
46. 3 Metrics
47. 3 Metrics Cost of Acquiring a Customer
48. 3 Metrics Cost of Acquiring a Customer Lifetime Value of a Customer
49. 3 Metrics Cost of Acquiring a Customer Lifetime Value of a Customer Months to Recover CAC
50. 3. Determine Success
51. We now have everything that we need!
52. Is the LTV > 3x CAC?
53. Is the LTV > 3x CAC? We need a ratio of 3:1 to determine success
54. LTV > 3x CAC Acme Corp.
55. Acme Corp. $6,675 : $3,033
56. 2.2 x Acme Corp.
57. Long run
58. Months to recover CAC < 12
59. Months = 2.2 Acme Corp.
61. How can we affect these numbers?
62. How can we affect these numbers? • Reduce churn
63. How can we affect these numbers? • Reduce churn • Increase sales
64. How can we affect these numbers? • Reduce churn • Increase sales • Cross sell
65. How can we affect these numbers? • Reduce churn • Increase sales • Cross sell • Invest in profitable leads
66. LTV = $2,225 * 60% LTV - Churn 20% 2015
67. LTV = $6,675 LTV - Churn
68. LTV = $2,225 * 60% LTV - Churn 20% 2015
69. LTV = $2,225 * 60% LTV - Churn 20% 2015 15%
70. LTV = $8,900 per customer LTV
71. ACme - churn $2,225 K more per customer
72. Acme - churn $1,335,000 more!
74. 1. SaaS is different Summary
75. 1. SaaS is different 2. Key Metrics Summary
76. 1. SaaS is different 2. Key Metrics 3. How to determine success Summary
77. 3 key areas 1. Acquiring a Customer 2. Retaining Customers 3. Monetizing Customers
78. bit.ly/sass-metrics bit.ly/saas-definitions Further reading
79. Thank you!