SaaS Metrics for Dummies

C620790ae5bf5b50c245b2e0ef95f338?s=47 Dean Hume
April 07, 2016

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.

C620790ae5bf5b50c245b2e0ef95f338?s=128

Dean Hume

April 07, 2016
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Transcript

  1. SaaS Metrics for Dummies

  2. ?

  3. None
  4. What is SaaS?

  5. None
  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

  16. None
  17. None
  18. What happens if we add more Customers?

  19. None
  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
  26. None
  27. CAC

  28. CAC Cost of acquiring a Customer

  29. None
  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.

  45. None
  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.

  60. None
  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!

  73. None
  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!