SaaS Metrics for Dummies

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

Presentation Details
----------------------------------

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
   

   View Slide

2. ?
   

   View Slide

3. View Slide

4. What is SaaS?
   

   View Slide

5. View Slide

6. What is SaaS?
   A licensing and delivery model in which
   software is licensed on a subscription basis
   and is centrally hosted
   

   View Slide

7. 3 Key Areas
   

   View Slide

8. 3 Key Areas
   1. Acquiring Customers
   

   View Slide

9. 3 Key Areas
   1. Acquiring Customers
   2. Retaining Customers
   

   View Slide

10. 3 Key Areas
    1. Acquiring Customers
    2. Retaining Customers
    3. Monetizing Customers
    

    View Slide

11. 1. SaaS is different
    This Talk
    

    View Slide

12. 1. SaaS is different
    2. Key Metrics
    This Talk
    

    View Slide

13. 1. SaaS is different
    2. Key Metrics
    3. How to determine Success
    This Talk
    

    View Slide

14. 1. SaaS is different
    

    View Slide

15. Cash Flow
    

    View Slide

16. View Slide

17. View Slide

18. What happens if we
    add more
    Customers?
    

    View Slide

19. View Slide

20. “Mo money, mo problems”
    

    View Slide

21. SaaS metrics FTW!
    

    View Slide

22. 2 . SaaS Metrics
    

    View Slide

23. 3 Metrics
    1. Cost of acquiring a customer
    

    View Slide

24. 3 Metrics
    1. Cost of acquiring a customer
    2. Lifetime value of a customer
    

    View Slide

25. 3 Metrics
    1. Cost of acquiring a customer
    2. Lifetime value of a customer
    3. Months to recover CAC
    

    View Slide

26. View Slide

27. CAC
    

    View Slide

28. CAC
    Cost of acquiring
    a Customer
    

    View Slide

29. View Slide

30. CAC = All expenses
    Cost to Acquire Customer
    

    View Slide

31. CAC = $3,033
    Acme Corp.
    

    View Slide

32. Customer Lifetime
    

    View Slide

33. Customer Lifetime =
    1
    Customer Churn Rate
    Customer Lifetime
    

    View Slide

34. Customer Lifetime =
    1
    20%
    Acme Corp.
    

    View Slide

35. Customer Lifetime = 5 years
    Acme Corp.
    

    View Slide

36. LTV
    

    View Slide

37. LTV
    Lifetime value of a
    customer
    

    View Slide

38. LTV = Average MRR * Gross Margin
    LTV
    Monthly Churn Rate
    

    View Slide

39. LTV = $2,225 * 60%
    LTV
    20%
    

    View Slide

40. LTV = $6,675
    Acme Corp.
    

    View Slide

41. Months to
    recover CAC
    

    View Slide

42. Months =
    CAC
    MRR * Gross Margin
    Months to Recover CAC
    

    View Slide

43. Months =
    $3,033
    $2,225 * 60%
    Months to Recover CAC
    

    View Slide

44. Months = 2.2
    Acme Corp.
    

    View Slide

45. View Slide

46. 3 Metrics
    

    View Slide

47. 3 Metrics
    Cost of Acquiring a Customer
    

    View Slide

48. 3 Metrics
    Cost of Acquiring a Customer
    Lifetime Value of a Customer
    

    View Slide

49. 3 Metrics
    Cost of Acquiring a Customer
    Lifetime Value of a Customer
    Months to Recover CAC
    

    View Slide

50. 3. Determine Success
    

    View Slide

51. We now have
    everything
    that we need!
    

    View Slide

52. Is the LTV > 3x CAC?
    

    View Slide

53. Is the LTV > 3x CAC?
    We need a
    ratio of 3:1
    to determine
    success
    

    View Slide

54. LTV > 3x CAC
    Acme Corp.
    

    View Slide

55. Acme Corp.
    $6,675 : $3,033
    

    View Slide

56. 2.2 x
    Acme Corp.
    

    View Slide

57. Long run
    

    View Slide

58. Months to recover CAC < 12
    

    View Slide

59. Months = 2.2
    Acme Corp.
    

    View Slide

60. View Slide

61. How can we affect
    these numbers?
    

    View Slide

62. How can we affect
    these numbers?
    ● Reduce churn
    

    View Slide

63. How can we affect
    these numbers?
    ● Reduce churn
    ● Increase sales
    

    View Slide

64. How can we affect
    these numbers?
    ● Reduce churn
    ● Increase sales
    ● Cross sell
    

    View Slide

65. How can we affect
    these numbers?
    ● Reduce churn
    ● Increase sales
    ● Cross sell
    ● Invest in profitable leads
    

    View Slide

66. LTV = $2,225 * 60%
    LTV - Churn
    20%
    2015
    

    View Slide

67. LTV = $6,675
    LTV - Churn
    

    View Slide

68. LTV = $2,225 * 60%
    LTV - Churn
    20%
    2015
    

    View Slide

69. LTV = $2,225 * 60%
    LTV - Churn
    20%
    2015
    15%
    

    View Slide

70. LTV = $8,900 per customer
    LTV
    

    View Slide

71. ACme - churn
    $2,225 K more per customer
    

    View Slide

72. Acme - churn
    $1,335,000 more!
    

    View Slide

73. View Slide

74. 1. SaaS is different
    Summary
    

    View Slide

75. 1. SaaS is different
    2. Key Metrics
    Summary
    

    View Slide

76. 1. SaaS is different
    2. Key Metrics
    3. How to determine success
    Summary
    

    View Slide

77. 3 key areas
    1. Acquiring a Customer
    2. Retaining Customers
    3. Monetizing Customers
    

    View Slide

78. bit.ly/sass-metrics
    bit.ly/saas-definitions
    Further reading
    

    View Slide

79. Thank you!
    

    View Slide