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SaaS Metrics for Dummies
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?
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What is SaaS?
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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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3 Key Areas
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3 Key Areas 1. Acquiring Customers
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3 Key Areas 1. Acquiring Customers 2. Retaining Customers
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3 Key Areas 1. Acquiring Customers 2. Retaining Customers 3. Monetizing Customers
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1. SaaS is different This Talk
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1. SaaS is different 2. Key Metrics This Talk
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1. SaaS is different 2. Key Metrics 3. How to determine Success This Talk
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1. SaaS is different
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Cash Flow
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What happens if we add more Customers?
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“Mo money, mo problems”
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SaaS metrics FTW!
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2 . SaaS Metrics
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3 Metrics 1. Cost of acquiring a customer
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3 Metrics 1. Cost of acquiring a customer 2. Lifetime value of a customer
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3 Metrics 1. Cost of acquiring a customer 2. Lifetime value of a customer 3. Months to recover CAC
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CAC
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CAC Cost of acquiring a Customer
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CAC = All expenses Cost to Acquire Customer
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CAC = $3,033 Acme Corp.
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Customer Lifetime
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Customer Lifetime = 1 Customer Churn Rate Customer Lifetime
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Customer Lifetime = 1 20% Acme Corp.
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Customer Lifetime = 5 years Acme Corp.
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LTV
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LTV Lifetime value of a customer
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LTV = Average MRR * Gross Margin LTV Monthly Churn Rate
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LTV = $2,225 * 60% LTV 20%
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LTV = $6,675 Acme Corp.
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Months to recover CAC
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Months = CAC MRR * Gross Margin Months to Recover CAC
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Months = $3,033 $2,225 * 60% Months to Recover CAC
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Months = 2.2 Acme Corp.
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3 Metrics
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3 Metrics Cost of Acquiring a Customer
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3 Metrics Cost of Acquiring a Customer Lifetime Value of a Customer
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3 Metrics Cost of Acquiring a Customer Lifetime Value of a Customer Months to Recover CAC
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3. Determine Success
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We now have everything that we need!
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Is the LTV > 3x CAC?
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Is the LTV > 3x CAC? We need a ratio of 3:1 to determine success
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LTV > 3x CAC Acme Corp.
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Acme Corp. $6,675 : $3,033
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2.2 x Acme Corp.
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Long run
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Months to recover CAC < 12
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Months = 2.2 Acme Corp.
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How can we affect these numbers?
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How can we affect these numbers? ● Reduce churn
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How can we affect these numbers? ● Reduce churn ● Increase sales
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How can we affect these numbers? ● Reduce churn ● Increase sales ● Cross sell
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How can we affect these numbers? ● Reduce churn ● Increase sales ● Cross sell ● Invest in profitable leads
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LTV = $2,225 * 60% LTV - Churn 20% 2015
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LTV = $6,675 LTV - Churn
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LTV = $2,225 * 60% LTV - Churn 20% 2015
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LTV = $2,225 * 60% LTV - Churn 20% 2015 15%
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LTV = $8,900 per customer LTV
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ACme - churn $2,225 K more per customer
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Acme - churn $1,335,000 more!
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1. SaaS is different Summary
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1. SaaS is different 2. Key Metrics Summary
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1. SaaS is different 2. Key Metrics 3. How to determine success Summary
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3 key areas 1. Acquiring a Customer 2. Retaining Customers 3. Monetizing Customers
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bit.ly/sass-metrics bit.ly/saas-definitions Further reading
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Thank you!