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9 Worst Practices in SaaS Metrics (TC Baltics Edition)

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This is the version of Christoph's '9 Worst Practices in SaaS Metrics' as presented by Nicolas Wittenborn at Tech Chill Baltics on February 13, 2014.

This is the version of Christoph's '9 Worst Practices in SaaS Metrics' as presented by Nicolas Wittenborn at Tech Chill Baltics on February 13, 2014.

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  • 1. 9! Worst Practices
 in SaaS Metrics Y: ! rn ODA tenbo T Wit olas Nic Christoph Janz! Point Nine Capital
  • 2. About me Associate at Point Nine Capital! I blog (too little) at heyni.co and tweet (too much) at @ncsh We love SaaS!
  • 3. A new member !
  • 4. 9 HORROR worst practices in SaaS Metrics
  • 5. Image source:
  • 6. Image source:
  • 7. Image source:
  • 8. worst practice 9 Confuse MRR with Cash Inflow (or Bookings or Sales or Revenues)
  • 9. MRR: • Monthly Recurring Revenue! • Shows how much revenue you make next month if you don‘t win any new customers 
 (assuming no churn, no upgrades/downgrades, etc.)! • #1 SaaS metric. Much more important indicator than bookings or cash inflow 
 (but cash inflow pays the bills!) Example: • • • 2 customers! 1 on a $20/m monthly plan! 1 on a $120/y yearly plan! => MRR = $30 ue!! even ! ble r alue! dicta e v Pre fetim ple! ulti i L nm uatio Val
  • 10. worst practice 8 Underestimate churn (by mixing up monthly with yearly plans)
  • 11. Churn rate # of customers who churned # of customers who could have churned Including customers who can‘t cancel in the denominator screws up your churn estimate! n in chur n! rget al pla ’t fo anci Don r fin you
  • 12. worst practice 7 Ignore your cohorts
  • 13. Retention over user lifetime Change in retention over product lifetime Image source: Cohort analyses are the only way to get a good understanding of retention and customer lifetimes
  • 14. worst practice 6 Don‘t track each step of the conversion funnel
  • 15. ttention nterest esire ction
  • 16. AARRR!v Ac Ac Re Ref Re e qu tiv ten rr enu isit ati e tio al on ion n
  • 17. Visitors Free Trial Signups Paying
 Customers Visitor-to-Trial Conversion Rate Trial-to-Paying! Conversion Rate Referrals Retention Rate! and Account Expansions
  • 18. worst practice 5 Mix up visitors to your marketing website with users of your software
  • 19. 1800$ 5,00%$ 1600$ 4,50%$ 1400$ 4,00%$ 3,50%$ 1200$ 3,00%$ 1000$ 2,50%$ 800$ 2,00%$ 600$ 1,50%$ 400$ 1,00%$ 200$ 0,50%$ 0$ 0,00%$ 1$ 2$ Visits$ 3$ 4$ Signups$ 5$ Signup$Rate$ 6$
  • 20. 1600$ 6,00%$ 1400$ 5,00%$ 1200$ 4,00%$ 1000$ 800$ 3,00%$ 600$ 2,00%$ 400$ 1,00%$ 200$ 0$ 0,00%$ 1$ 2$ Signups$ 3$ 4$ Website$visits$ 5$ 6$ Signup$Rate$
  • 21. worst practice 4 Show CACs on a blended basis only (mixing up paid and non-paid sources of leads)
  • 22. Example: • • 100 customers @ $0 per customer! 20 customers @ $500 per customer average CACs of $83.33, but ! the average is pretty meaningless
  • 23. Catch the low-hanging fruits, just don‘t expect them to scale!
  • 24. worst practice 3 Attribute all conversions to your sales team
  • 25. Find out how well your signups are converting without being called by a salesperson. ! ! A/B test and calculate the ROI on your sales investments based on the conversion uplift. it’s aybe n? sa: M perso ver les Vice he sa ot t n
  • 26. worst practice 2 Assume you‘re growing exponentially
  • 27. • True exponential growth is very, very rare in SaaS – requires virality which most SaaS products don‘t have! • Most SaaS companies grow linearly and with step changes! • Even a modest exponential growth rate of 10% p.m. is very hard to sustain for a longer period of time Reading exponential growth into linear growth numbers can lead to wrong conclusions N: ! MA , OD OW L GO G, SL ATH AI G LON OF DE THE AMP SR SAA
  • 28. worst practice 1 Don‘t start tracking KPIs until investors request it
  • 29. Because... • Many metrics are actionable – they tell you what to focus on, when to invest in acceleration, etc.! • Metrics help you focus your team on what matters most! • Investors want historic numbers, not just a snapshot
  • 30. Thank you. ! y ;) .com eas cap r, if nine Questions?! O nt poi las@ christoph@pointninecap.com nico

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