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SaaS Metrics for Dummies

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.

Dean Hume

April 07, 2016
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Transcript

  1. SaaS Metrics
    for Dummies

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  2. What is SaaS?

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

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  4. 3 Key Areas
    1. Acquiring Customers

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  5. 3 Key Areas
    1. Acquiring Customers
    2. Retaining Customers

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  6. 3 Key Areas
    1. Acquiring Customers
    2. Retaining Customers
    3. Monetizing Customers

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  7. 1. SaaS is different
    This Talk

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

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

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  10. 1. SaaS is different

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  11. What happens if we
    add more
    Customers?

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  12. “Mo money, mo problems”

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  13. SaaS metrics FTW!

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  14. 2 . SaaS Metrics

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  15. 3 Metrics
    1. Cost of acquiring a customer

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  16. 3 Metrics
    1. Cost of acquiring a customer
    2. Lifetime value of a customer

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  17. 3 Metrics
    1. Cost of acquiring a customer
    2. Lifetime value of a customer
    3. Months to recover CAC

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  18. CAC
    Cost of acquiring
    a Customer

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  19. CAC = All expenses
    Cost to Acquire Customer

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  20. CAC = $3,033
    Acme Corp.

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  21. Customer Lifetime

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  22. Customer Lifetime =
    1
    Customer Churn Rate
    Customer Lifetime

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  23. Customer Lifetime =
    1
    20%
    Acme Corp.

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  24. Customer Lifetime = 5 years
    Acme Corp.

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  25. LTV
    Lifetime value of a
    customer

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

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

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  28. LTV = $6,675
    Acme Corp.

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  29. Months to
    recover CAC

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

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

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  32. Months = 2.2
    Acme Corp.

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  33. 3 Metrics
    Cost of Acquiring a Customer

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  34. 3 Metrics
    Cost of Acquiring a Customer
    Lifetime Value of a Customer

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  35. 3 Metrics
    Cost of Acquiring a Customer
    Lifetime Value of a Customer
    Months to Recover CAC

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  36. 3. Determine Success

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  37. We now have
    everything
    that we need!

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  38. Is the LTV > 3x CAC?

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

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  40. LTV > 3x CAC
    Acme Corp.

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

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  42. 2.2 x
    Acme Corp.

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  43. Months to recover CAC < 12

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  44. Months = 2.2
    Acme Corp.

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  45. How can we affect
    these numbers?

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

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

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

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

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

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  51. LTV = $6,675
    LTV - Churn

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

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

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  54. LTV = $8,900 per customer
    LTV

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

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

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  57. 1. SaaS is different
    Summary

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

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

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  60. 3 key areas
    1. Acquiring a Customer
    2. Retaining Customers
    3. Monetizing Customers

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

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