9Worst Practicesin SaaS MetricsChristoph JanzPoint
Nine Capital

About meFounder Angel investor VCMore
about me:LinkedIn: www.linkedin.com/in/christophjanzPoint Nine Capital: www.pointninecap.comTwitter: chrija

www.theangelvc.netWhen I find the time
I blog at www.theangelvc.net, mainly about SaaS topics.My SaaS KPI dashboard:http://bit.ly/saasdashboard

9HORRORworst practicesin SaaS Metrics

I want to talk about
9 of the worst practices inSaaS metrics – like the SaaS metric equivalentof this...Image source: www.hadonejob.com

...or this...Image source: www.hadonejob.com

...or this! :-)Image source: www.hadonejob.com

Confuse MRR with Cash Inflow(or
Bookings or Sales or Revenues)9worst practice

MRR:• Monthly Recurring Revenue• Shows
how much revenue you make next month if you don‘t winany new customers(assuming no churn, no upgrades/downgrades, etc.)• #1 SaaS metric. Much more important indicator than bookings orcash inflow(but cash inflow pays the bills!)• 2 customers• 1 on a $20/m monthly plan• 1 on a $120/y yearly plan=> MRR = $30Example:

Underestimate churn(by mixing up monthly
with yearly plans)8worst practice

Churn rate# of customers who
churned# of customers who could have churnedIncluding customers who can‘t cancel in thedenominator screws up your churn estimate!If you include customers who can‘t churn inyour churn calculation, you‘ll be hit by a badsurprise once they can leave!

7worst practiceIgnore your cohorts

Cohort analyses are the only
way to get a goodunderstanding of retention and customer lifetimesImage source: MixPanel

Don‘t track each step of
theconversion funnelworst practice6

Whether you use the age-old
AIDA formula ...

AARRR!... or Dave McClure‘s „AARRR“
...(for Acquisition, Activation, Retention, Referral and Revenue)

VisitorsFree Trial SignupsPayingCustomersVisitor-to-TrialConversion RateTrial-to-PayingConversion Rate...
you have to track the key steps of yourconversion funnel and you should be obsessedabout improving each of them.Retention Rateand Account ExpansionsReferrals

Mix up visitors to your
marketingwebsite with users of your softwareworst practice5

0,00%$0,50%$1,00%$1,50%$2,00%$2,50%$3,00%$3,50%$4,00%$4,50%$5,00%$0$200$400$600$800$1000$1200$1400$1600$1800$1$ 2$ 3$ 4$ 5$
6$Visits$ Signups$ Signup$Rate$This can lead to a weird chart like this: Your visits aregoing up slowly but surely, but your signups are flat(and hence your signup rate goes down).

0,00%$1,00%$2,00%$3,00%$4,00%$5,00%$6,00%$0$200$400$600$800$1000$1200$1400$1600$1$ 2$ 3$ 4$ 5$
6$Signups$ Website$visits$ Signup$Rate$If you correctly track separate app visits from website visits itlooks like this.Turns out your signup rate didn‘t go down(good news) but you‘re not growing website traffic (badnews), which is a very actionable insight.

Show CACs on a blended
basis only4worst practice(mixing up paid and non-paid sources of leads)

• 100 customers @ $0
per customer• 20 customers @ $500 per customeraverage CACs of $83.33, butthe average is pretty meaninglessExample:

Catch the low-hanging fruits, justdon‘t
expect them to scale!

Attribute all conversionsto your sales
team3worst practice

Do you know these cars?
When small children take a tour in them,they believe they are steering them around the curves.If you‘re attributing all conversions to your sales efforts you‘re doingsomething similar. :)

Find out how well your
signups are convertingwithout being called by a salesperson.A/B test and calculate the ROI on your salesinvestments based on the conversion uplift.

Assume you‘re growing exponentially2worst practice

• True exponential growth is
very, very rare in SaaS – requires viralitywhich 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 tosustain for a longer period of timeReading exponential growth into linear growthnumbers can lead to wrong conclusions

Don‘t start tracking KPIs untilinvestors
request it1worst practice

Don‘t manage your company likes
this. :-)

• Investors want historic numbers,
not just a snapshot• Many metrics are actionable – they tell you what to focus on, whento invest in acceleration, etc.• Metrics help you focus your team on what matters mostBecause...

Thank you.Questions?christoph@pointninecap.com