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SaaS	  Value	  Drivers	  &	  Metrics	  	        Jos	  van	  Schaik	  &	  Frits	  Vel4nk	  	  
Opportuni4es?	  
The	  SaaS	  Value	  Proposi4on	     WHY	  INVESTORS	     ARE	  INTERESTED	  
The	  Value	  Components	  of	  SaaS	                                         High	  and	                                 ...
CFO	  QUESTIONS	  10/10/12	  
A	  Business	  Example	                    Company	  “BZN”	  	  10/10/12	  
THE	  SALES	  CASE:	  WE	  HAVE	  DONE	  GREAT!	           LET’S	  INVEST	  MORE	  IN	  SALES 	              IN	  EUR000  ...
BOOKINGS?	                 IN	  EUR000            BOOKINGS BIG	  5	  YEAR	  DEAL           	  	  	  	  	  	  	  	  	  	  	...
CFO:	  BOOKINGS	  RECURRING	  (ARR)                                          	  IN	  EUR000                              B...
CHURN:	  DID	  WE	  LOOSE	  ANY?	  CUSTOMER	  RENEWAL	  REPORT	  Q2	  2012                                       #    ANNU...
THE	  CASE	  BASED	  ON	  SAAS	  METRICS:	  WE	                HAVE	  DONE	  TERRIBLE!     	  IN	  EUR000                 ...
IT	  GETS	  WORSE….	  CHURN	  CONTINUES	              AND	  COMPETITION	  BENEFITS  	  IN	  EUR000                        ...
WE	  ARE	  LOOSING	  MONEY!	  BANKRUPT	  IF	           WE	  CONTINUE	  THIS	  WAY!                                      	 ...
TIME	  FOR	  DRAMATIC	  CHANGE	                                      	  •  RECURRING	  REVENUES	  DROP	  •  RECURRING	  CO...
SOME	  THEORY	  10/10/12	  
SaaS	  Profitability;	  Breakeven	  when	  Customer	                                                       Acquisi4on	  Cos...
SaaS	  Profitability;	  Churn	  pushes	  out	  the	                  Time	  to	  Profit 	                                   ...
SaaS	  Profitability;	  Growth	  pushes	                                                               out	  the	  Time	  t...
SaaS	  Profitability;	  Customer	  Value:	  effec4ve	                                                        upselling	  imp...
Managing	  the	  Cost	  of	  Acquisi4on:	  Customer	                               Acquisi4on	  Cost	  Ra4o    	          ...
OUR	  CAC	  RATIO	  IS	  0,18	  IN	  Q2!                                                   	                              ...
FIX	  THE	  CACR!	  WHAT	  CAN	  WE	  DO?	                  ARR	  -­‐/-­‐	  ACS	                                          ...
What	  do	  SaaS	  providers	  say!	  10/10/12	  
Research MethodologyTotango surveyed 134 executives at SaaScompanies about the key performance indicatorsused to run their...
68% of SaaS Executives are unhappy with the current metrics and1   methods available to measure SaaS business progress, wh...
57% of SaaS Executives are planning to implement new Key2   Performance Indicators to better measure and manage their    b...
There is a shift towards customer centric measurements,3   designed to report on the success of existing customers: 5 out ...
OVERVIEW	  AND	  SUMMARY	  
10/10/12	  
What	  is	  your	  current	  business?	                                           1	                              Volume	 ...
What	  is	  your	  future	  SaaS	  en	  Cloud	  business?	                                           1	                   ...
Who do you want to be ?                          I want to deliver                                     I want to extend   ...
KEY	  VALUE	  DRIVERS	  &	  METRICS	  for	  SAAS	                                                             	           ...
Demonstrate	  the	  value	  of	  the	  SaaS	              model	  to	  the	  stakeholders!      	  •  Clear	  Posi4oning	 ...
THE	  PATH	  TO	  A	  MANAGABLE	  AND	  EFFECTIVE	                    SAAS	  REPORTING	  SYSTEM        	  •     PAINT	  TH...
And	  You	  will	  be	  
www.saasenergy.com	  	  	  frits@saasenergy.com	  	  	  	  	  	  &	  	  	  	  jos@saasenergy.com	  
BENCHMARKS	  10/10/12	  
10/10/12	  
10/10/12	  
10/10/12	  
10/10/12	  
Tues1200 metrics value-veltinkschaik-saasenergy
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Transcript of "Tues1200 metrics value-veltinkschaik-saasenergy"

  1. 1. SaaS  Value  Drivers  &  Metrics     Jos  van  Schaik  &  Frits  Vel4nk    
  2. 2. Opportuni4es?  
  3. 3. The  SaaS  Value  Proposi4on   WHY  INVESTORS   ARE  INTERESTED  
  4. 4. The  Value  Components  of  SaaS   High  and   scalable   Cost   Revenue   Efficiency   Growth   Maximize   Customer   Value  
  5. 5. CFO  QUESTIONS  10/10/12  
  6. 6. A  Business  Example   Company  “BZN”    10/10/12  
  7. 7. THE  SALES  CASE:  WE  HAVE  DONE  GREAT!   LET’S  INVEST  MORE  IN  SALES   IN  EUR000 Q1 Q2 VARIANCE BUDGET VARIANCEREVENUES                1.350                  1.854   37%                            1.685   10%BOOKINGS                1.600                  3.130   96%                            2.087   50%SALES  &  MARKETING  COST 450 570 27% 500 14% 10/10/12  
  8. 8. BOOKINGS?   IN  EUR000 BOOKINGS BIG  5  YEAR  DEAL                          1.780   TWO  NEW  3  YEAR  DEALS                                  576   SEVEN  RENEWALS                                  672   UPSELLING  ON  3  RENEWALS                                  102   TOTAL                          3.130  10/10/12  
  9. 9. CFO:  BOOKINGS  RECURRING  (ARR)  IN  EUR000 BOOKINGS 1  OFF ARRBIG  5  YEAR  DEAL                          1.780   1360                              84  TWO  NEW  3  YEAR  DEALS                                  576                            192  SEVEN  RENEWALS                                  672                                  -­‐      DISCOUNT  ON  RENEWALS                      -­‐168  UPSELLING  ON  3  RENEWALS                                  102                            102  CLOSING  Q2                          3.130                  1.360                            210   10/10/12  
  10. 10. CHURN:  DID  WE  LOOSE  ANY?  CUSTOMER  RENEWAL  REPORT  Q2  2012 # ANNUAL  REVENUES  000 DISCOUNTS  000 UPSELLING  000 TOTAL  ANNUAL    REVENUESCUSTOMERS  UP  FOR  RENEWAL -­‐15                                                                          -­‐2.040                                                                                      -­‐2.040CUSTOMERS  RENEWED 7                                                                                    840                                                    -­‐168                                                        102                                                                                                774CUSTOMERS  LOST -­‐8                                                                          -­‐1.200                                                    -­‐168                                                        102                                                                                      -­‐1.266 CUSTOMER  SUPPORT  EXPECTS  TO  LOOSE  ANOTHER   16  CUSTOMERS  IN  Q3  AND  Q4!   10/10/12  
  11. 11. THE  CASE  BASED  ON  SAAS  METRICS:  WE   HAVE  DONE  TERRIBLE!  IN  EUR000 BOOKINGS 1  OFF ARR CUSTOMERS AVG  ARROPENING  Q1                  6.000   50 120BIG  5  YEAR  DEAL                          1.780   1360                              84   1TWO  NEW  3  YEAR  DEALS                                  576                            192   2SEVEN  RENEWALS                                  672                                  -­‐       0DISCOUNT  ON  RENEWALS                      -­‐168   0UPSELLING  ON  3  RENEWALS                                  102                            102   0CHURN              -­‐1.200   -­‐8CLOSING  Q2                          3.130                  1.360                    5.010                                          45                                    111   10/10/12  
  12. 12. IT  GETS  WORSE….  CHURN  CONTINUES   AND  COMPETITION  BENEFITS  IN  EUR000 ARR CUSTOMERS AVG  ARRCLOSING  Q2                  5.010                                          45                                    111  EXPECTED  Q3  (NET)                      -­‐720   -­‐6EXPECTED  Q4  (NET)                      -­‐720   -­‐6CLOSING  Q4                  3.570                                          33                                    108   10/10/12  
  13. 13. WE  ARE  LOOSING  MONEY!  BANKRUPT  IF   WE  CONTINUE  THIS  WAY!    3 .000  2 .500 Recurring  Contribution/Acquisition   Cost  2 .000  1 .500 Recurring  Contribution Annualized  C AC  1 .000  5 00  -­‐ Q1 Q2 Q3 Q4 Time10/10/12  
  14. 14. TIME  FOR  DRAMATIC  CHANGE    •  RECURRING  REVENUES  DROP  •  RECURRING  CONTRIBUTION  PER  CUSTOMER   DROPS  (ARR  DROP  PLUS  ACS  NOT  100%   FLEXIBLE)  •  SALES  IS  INEFFECTIVE  AND  WAY  TOO   EXPENSIVE!   MINIMIZE  SALES  COST  AND  FIX   ORGANIZATION  FIRST  10/10/12  
  15. 15. SOME  THEORY  10/10/12  
  16. 16. SaaS  Profitability;  Breakeven  when  Customer   Acquisi4on  Cost  =  Recurring  Contribu4on   Achieving  SaaS  Profitability;  No  Churn  600.000Recurring  Contribution/Acquisition   Cost  500.000  400.000  300.000 Recurring  Contribution Customer  Acquisition  Cost  200.000  100.000  -­‐ 10/10/12    1  2  3  4  5  6  7  8  9  1 0
  17. 17. SaaS  Profitability;  Churn  pushes  out  the   Time  to  Profit   Achieving  SaaS  Profitability;  25%  and  35%  Churn  6 00.000  5 00.000 Recurring  Contribution/Acquisition   Cost  4 00.000 Recurring  Contribution  2 5%  3 00.000 Recurring  Contribution  3 5% Recurring  Contribution  2 00.000 Customer  Acquisition  Cost  1 00.000 Time  to   Time  to  Profit   Profit    -­‐  1  2  3  4  5  6  7  8  9  1 0 Time10/10/12  
  18. 18. SaaS  Profitability;  Growth  pushes   out  the  Time  to  Profit   Achieving  SaaS  Profitability;  20%  growth  of   acquisition  rate  1 .600.000  1 .400.000 CONTROL  YOUR   CAC!  Recurring  Contribution/Acquisition   Cost  1 .200.000  1 .000.000 CAC  =  2000  8 00.000 CAC  =  2750 Recurring  Contribution  6 00.000 CAC  =  1250  4 00.000  2 00.000 Time  to  Profit    -­‐  1  2  3  4  5  6  7  8  9  1 0 Time 10/10/12  
  19. 19. SaaS  Profitability;  Customer  Value:  effec4ve   upselling  improves  the  Time  to  Profit   Achieving  SaaS  Profitability;  20%  growth  of   acquisition  rate;  15%  Upsell  @  no  extra  cost  1 .800.000  1 .600.000Recurring  Contribution/Acquisition   Cost  1 .400.000  1 .200.000  1 .000.000 CAC  =  2000 CAC  =  2750  8 00.000 Recurring  Contribution  6 00.000 RC  including  15%  Upsell  4 00.000 Time  to  Profit    2 00.000  -­‐  1  2  3  4  5  6  7  8  9  1 0 Time 10/10/12  
  20. 20. Managing  the  Cost  of  Acquisi4on:  Customer   Acquisi4on  Cost  Ra4o   Stop  invesLng  and  look   <  0.5   at  your  business   ARR  -­‐/-­‐  ACS   ConLnue  to  invest  in   0.5  >  =  <  1   Growth   CAC   >  1   ACCELERATE!  • ARR  =  Annual  Recurring  Revenues  per  customer  • ACS  =  Annual  Customer  Service  Cost  per  customer  • CAC  =  Customer  Acquisi4on  Cost    per  customer   10/10/12  
  21. 21. OUR  CAC  RATIO  IS  0,18  IN  Q2!   Stop  invesLng  and  look   0,18  <  0.5   at  your  business   (210  -­‐/-­‐  105)   ConLnue  to  invest  in   0.5  >  =  <  1   Growth   570   >  1   ACCELERATE!  • ARR  =  Annual  Recurring  Revenues  per  customer  • ACS  =  Annual  Customer  Service  Cost  per  customer  • CAC  =  Customer  Acquisi4on  Cost    per  customer   10/10/12  
  22. 22. FIX  THE  CACR!  WHAT  CAN  WE  DO?   ARR  -­‐/-­‐  ACS   Lower  Cost  of  Services   Minimize  Churn   Lower  CAC   Upselling   >  0.5   CAC   Control  the   Growth  and  watch  • ARR  =  Annual  Recurring  Revenues  per  customer   the  cash  flow!  • ACS  =  Annual  Customer  Service  Cost  per  customer  • CAC  =  Customer  Acquisi4on  Cost    per  customer   10/10/12  
  23. 23. What  do  SaaS  providers  say!  10/10/12  
  24. 24. Research MethodologyTotango surveyed 134 executives at SaaScompanies about the key performance indicatorsused to run their businesses. The same surveywas also conducted in 2011 giving Totango uniqueinsights into SaaS trends.
  25. 25. 68% of SaaS Executives are unhappy with the current metrics and1 methods available to measure SaaS business progress, which is up from 61% from last year. 68% 61% 2011 2012
  26. 26. 57% of SaaS Executives are planning to implement new Key2 Performance Indicators to better measure and manage their business in the next twelve months. 57%
  27. 27. There is a shift towards customer centric measurements,3 designed to report on the success of existing customers: 5 out of the top 6 new Key Performance Indicators are customer metrics. Product  Usage  Analysis   39%   Churn   16%   CLV   13%   Campaign  performance   9%   Upsell   8%   NPS   5%  
  28. 28. OVERVIEW  AND  SUMMARY  
  29. 29. 10/10/12  
  30. 30. What  is  your  current  business?   1   Volume   2   3   Complexity  &  Price   (  CAC  &  TCS)  10  October  2012  
  31. 31. What  is  your  future  SaaS  en  Cloud  business?   1   Volume   2   3   Complexity  &  Price   (  CAC  &  TCS)  10  October  2012  
  32. 32. Who do you want to be ? I want to deliver I want to extend my application / and value to other asset as a cloud providers clouds service I want to build and operate a public I want to resell a cloud infrastructure portfolio of public (IaaS and PaaS) CSP’s   Distributors   cloud services Enterprises   Start-­‐ups   ISV’s   SW-­‐Resellers   Hosters/MSP’s   HW-­‐Resellers   I want to help my clients to design, I want to Solu4ons  Providers   System  Integrators  build, manage their aggregate a private cloud portfolio of public Direct  Response  Centers   cloud services for my clients
  33. 33. KEY  VALUE  DRIVERS  &  METRICS  for  SAAS     PROFITABILITY  •  Customer  Related  (CACR)   –  Recurring  Contribu4on  (Recurring  Revenues  -­‐/-­‐  Recurring  Cost  of  Services)   –  Growth   –  Reten4on  Rate  (nega4ve  =  Churn)   –  Cost  of  Acquisi4on  •  Opera4onal  Service  Cost  Related  (ACS)   –  Recurring  Cost  of  Running  a  Service  including  Cost  of  Infrastructure   –  Speed  (and  cost)  of  Deployment  •  CASH   –  Cash  Posi4on  on  short,  mid  and  long  term   –  Monthly  Recurring  Revenues   –  Monthly  Recurring  Expenses  •  ALL  RELATED  IN  MANAGING  THE  SAAS  BUSINESS  MODEL   10/10/12  
  34. 34. Demonstrate  the  value  of  the  SaaS   model  to  the  stakeholders!  •  Clear  Posi4oning  and  Strategy  •  Value  Drivers  +  KPI’s  in  a  consistent  and   integrated  Business  Model   –  Effec4ve  repor4ng  of  KPI’s  monitoring  and   managing  the  model  •  Financing  need  clear    10/10/12  
  35. 35. THE  PATH  TO  A  MANAGABLE  AND  EFFECTIVE   SAAS  REPORTING  SYSTEM  •  PAINT  THE  LANDSCAPE  AND  LOOK  AHEAD   –  What  business  am  I  in  and  where  are  we  going   –  What  informa4on/  metrics  are  currently  used  to  manage  the  business   –  Which  metrics  would  bring  value  in  the  future  and  priori4ze   –   Are  data  available/accessible  to  feed  metrics  •  ORGANIZATIONAL  READINESS/URGENCY   –  Available  competencies   –  Change  management   –  Educa4onal  acceptance  •   Evaluate   –  Involve  key  personal  across  organiza4on   •  Get  feedback   •  Create  buy  in  •  Take  an  agile  approach   –  Define  approach,  Get  started,  Automate,  Prac4ce  what  you  preach,  Adapt  and  op4mize  •  Communica)e  with  all  stakeholders  involved   10/10/12  
  36. 36. And  You  will  be  
  37. 37. www.saasenergy.com      frits@saasenergy.com            &        jos@saasenergy.com  
  38. 38. BENCHMARKS  10/10/12  
  39. 39. 10/10/12  
  40. 40. 10/10/12  
  41. 41. 10/10/12  
  42. 42. 10/10/12  
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