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.

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9 Worst Practices in SaaS Metrics (TC Baltics Edition)

  1. 1. 9! Worst Practices
 in SaaS Metrics Y: ! rn ODA tenbo T Wit olas Nic Christoph Janz! Point Nine Capital
  2. 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. 3. A new member !
  4. 4. 9 HORROR worst practices in SaaS Metrics
  5. 5. Image source:
  6. 6. Image source:
  7. 7. Image source:
  8. 8. worst practice 9 Confuse MRR with Cash Inflow (or Bookings or Sales or Revenues)
  9. 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 = $30 ue!! even ! ble r alue! dicta e v Pre fetim ple! ulti i L nm uatio Val
  10. 10. worst practice 8 Underestimate churn (by mixing up monthly with yearly plans)
  11. 11. Churn rate # of customers who churned # of customers who could have churned Including customers who can‘t cancel in the denominator screws up your churn estimate! n in chur n! rget al pla ’t fo anci Don r fin you
  12. 12. worst practice 7 Ignore your cohorts
  13. 13. Retention over user lifetime Change in retention over product lifetime Image source: Cohort analyses are the only way to get a good understanding of retention and customer lifetimes
  14. 14. worst practice 6 Don‘t track each step of the conversion funnel
  15. 15. ttention nterest esire ction
  16. 16. AARRR!v Ac Ac Re Ref Re e qu tiv ten rr enu isit ati e tio al on ion n
  17. 17. Visitors Free Trial Signups Paying
 Customers Visitor-to-Trial Conversion Rate Trial-to-Paying! Conversion Rate Referrals Retention Rate! and Account Expansions
  18. 18. worst practice 5 Mix up visitors to your marketing website with users of your software
  19. 19. 1800$ 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. 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. 21. worst practice 4 Show CACs on a blended basis only (mixing up paid and non-paid sources of leads)
  22. 22. Example: • • 100 customers @ $0 per customer! 20 customers @ $500 per customer average CACs of $83.33, but ! the average is pretty meaningless
  23. 23. Catch the low-hanging fruits, just don‘t expect them to scale!
  24. 24. worst practice 3 Attribute all conversions to your sales team
  25. 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. 26. worst practice 2 Assume you‘re growing exponentially
  27. 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. 28. worst practice 1 Don‘t start tracking KPIs until investors request it
  29. 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. 30. Thank you. ! y ;) .com eas cap r, if nine Questions?! O nt poi las@ christoph@pointninecap.com nico

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