SaaS Revenue Primer Flux Analysis

SaaS Revenue Primer
Flux Analysis
January 2009
DevelopmentCorporate
www.developmentcorporate.com

Overview & Contents
The traditional approaches to technology revenue analysis are different for SaaS solutions. This presentation covers one of several techniques that executives and investors should use to assess the relative health of SaaS revenues
Contents
SaaS Revenue Primer
SaaS Revenue Flux Analysis
Other SaaS Revenue Analysis Topics
Copyright 2009 Development Corporate www.developmentcorporate.com

SaaS Revenue Primer Copyright 2009 Development Corporate www.developmentcorporate.com
Fundamentally different than traditional licensed software / maintenance / professional services economic model
Techniques for forecasting, analyzing, and assessing SaaS product line performance are different
New analytical approaches are needed to get underneath the SaaS iceberg
This is first of a multi-part presentation on SaaS Revenue Analysis

SaaS Revenue Components Copyright 2009 Development Corporate www.developmentcorporate.com
License, maintenance, and PSO fees replaced with:
User fees – monthly $ / per user or seat
Usage fees – cost per transaction / activity (often sold in bundles)
Setup/ Customization fees (generally one time)
‘ Junk’ fees (archiving, private labeling, special connectivity, etc.)
Take Away: Understand the Components and Structure of SaaS Revenue Stream

Flux Analysis Copyright 2009 Development Corporate www.developmentcorporate.com
Typical SaaS monthly revenue analysis
Top 10 customers showing strong growth (50%+ YoY)
Rest of customers driving 20% of total growth
Total SaaS Service Line growing 8%+
On the surface, all looks good

Flux Analysis Copyright 2009 Development Corporate www.developmentcorporate.com
Flux ‘categories’ are key:
How many new customers & how much revenue did they contribute?
How many customers quit/attritted & how much revenue did they contribute?
How many existing customers grew revenue & how much revenue did they contribute?
How many existing customers had flat revenues
How many customers had declining revenues & how much revenue did they contribute?
Understanding changes in SaaS revenue streams is critical
Always compare to another period (last month, last year, etc.)

Flux Analysis Interpretation Copyright 2009 Development Corporate www.developmentcorporate.com
Two major components:
Top 10 analysis
Flux category analysis
Provides real insight into SaaS product line behavior
In this example, you can see:
The two top 10 new customers (#1 & #2) were responsible for the majority of the month’s revenue growth
Customer #3 and #10 has huge growth – what was responsible for it?
Why did Customer #8 attrit? And what is going on with #7
Customers who grew revenue year over year and new customers drove the year over year change and covered the attritions and revenue declines
The customer count change showed that a net 483 left the business – is this a key trend for the future?

How Do You Implement Flux Analysis? Copyright 2009 Development Corporate www.developmentcorporate.com
Simple Excel-based analysis
Extract data from current systems
Assemble base data
Customer identifier, customer name, SaaS product name, period #1 revenues, period #2 revenues
Calculate period over period changes
Classify into flux categories: new, attritted, existing growth, existing flat, existing decline
Use pivot tables to summarize tables and generate charts

Other SaaS Revenue Analysis Topics Copyright 2009 Development Corporate www.developmentcorporate.com
Here are some other topics that will be covered in this series:
Customer Tiering Analysis
How to segment/profile SaaS customers into significant tiers
Pricing Analysis
Not all customers pay the same price. What customers are paying what rates and how does it relate to their tier / flux behavior
MoneyWheel Analysis
What are the repeatable sales transactions exist in your current as well as prospective customer base?

DevelopmentCorporate Copyright 2009 Development Corporate www.developmentcorporate.com DevelopmentCorporate is a strategic corporate development advisory firm for enterprise and mid-market technology companies. We assist management teams, board of directors, and investors in updating their merger, acquisition, and divestiture strategies and then we provide tactical support for the implementation of those strategies. We also provide support for strategic initiatives such market assessments, competitive intelligence updates, product/service portfolio analysis, etc. Finally, we have significant experience in guiding large scale organizations through corporate restructurings to either take advantage of new market opportunities or respond to changes in market conditions. www.developmentcorporate.com

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SaaS Revenue Primer Flux Analysis

by Development Corporate on Jan 12, 2009

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SaaS Revenue Primer Flux Analysis — Presentation Transcript