SellingSherpa

B2B Sales Best Practices

SaaS Metrics Palooza (Event Summary)

In a Downturn, Zone to Win: Adapting the SaaS Playbook to Uncertain Times (Geoffrey Moore)

  • SaaS performance metrics framework – 5 pillars of value
    • capital efficiency
    • customer acquisition efficacy
    • customer retention efficacy
    • customer expansion efficacy
    • operating efficiency
  • SaaS metrics in the performance zone
    • contracted ARR (CARR)
    • average annual contract value (ACV)
    • customer acquistiion cost (CAC)
    • Gross dollar retention (GDR)
    • Net dollar retention (NRR)
    • Logo retention
    • Customer lifetime value (CLTV)
  • SaaS metrics in the productivity zone
    • Customer lifetime value (CLTV)
    • Customer acquisition cost (CAC)
    • CAC payback period
    • CLTV/CAC
    • Customer acquisition cost ratio
      • New CAC ratio
      • Expansion CAC ratio
      • Blended CAC ratio
  • SaaS metrics in the incubation zone
    • CARR
    • Marquee logos with material ARR
    • Growth rate within target market segment
    • Share of target market segment(s) total ARR
  • SaaS metrics in the transformation zone
    • CARR
    • Growth rate
    • Market share
    • Market share status
    • Rule of 40 (links tradeoff between profitability and growth)
  • “I’m seeing a lot of organizations using the customer success organization to execute renewals.”
  • “Landing is expensive and I can see any other way to do it. A business purchase has to be approved by many different constituencies before the purchase order is signed. You can’t do that with automation; you have to do that with people.”

The Four Vital Signs of SaaS (Sam Baker)

  • Growth
    • YoY ARR growth
    • Net new ARR growth
  • Efficiency
    • Gross sales efficiency = total new ARR / S&M
    • Net sales efficiency = net new ARR / S&M
    • Magic Number = (change in GAAP revenue) * 4 / (prior year S&M)
  • Churn
    • Net retention
    • Gross Churn
  • Burn
    • Operating income (cash burn)
    • Rule of 40 (more for public companies)

Scaling to $100M (Mary D’Onofrio)

  1. ARR is the North Star
    1. Cloud companies typically retain 70% of their growth rate from the prior yearW\
  2. Win by Wide Margins
    1. Avg GM for cloud companies is 65% to 70%
    2. FCF Margin
    3. Cash conversion score = ARR / (total capital raised – cash)

You Can’t Fix a CAC Payback Period: An Operator vs. The Investor Perspective on SaaS Metrics (Dave Kellogg)

  • CPP = (new ARR this period) / (S&M prior period)
  • CPP is a risk metric, not a return metric. It is how long it takes to get your money back, not how much you make.
  • CPP should be less than 6 mos in SMB and less then 12 mos in ENT. Yet, public companies are ~20 mos. 6 mos is amazing, 12 mos is very good, 18 mos is good.
  • CPP is a compound metric which is desirable to investors who are looking for a screening metric

Metrics that Matter to a Chief Revenue Officer (Doug Landis & Crandall Kermott)

  • ARR (total & change)
    • Sales mix (net new vs. expansion)
  • ASP
  • NRR & Churn (logo & revenue)
  • Health score
  • Pipeline (total & change)
    • ToFu (qualified opps by source)
  • Conversion metrics
    • At what stage do deals stall?
    • What % of pipeline converts in a quarter?
    • Close rates (company, segment/group, AE)
    • Sales cycle
  • Cost metrics
    • CAC (and CLTV/CAC)
    • Sales efficiency = (sales & marketing cost)/bookings
    • Margin (esp. cost to serve)
    • Pricing
    • Cost per lead (by channel: partner, OB, IB)
  • Accountability metrics
    • Pipeline by AE last week
    • Meetings last week
    • Time since last response / activity
    • Total activity in ICP (and with the right contacts IBP – ideal buyer persona)
    • Opportunity hygiene (close dates, ARR, notes, etc.)
  • Activity –> response –> meetings scheduled –> meetings held –> qualified opps
  • Attainment (% of reps hitting or exceeding quota)
  • GTM strategy changes:
    • Pricing/packaging
    • New geo
    • New product
    • New vertical
    • New size segment
    • New partner channel
  • Accountability can only be attained through proper goal setting

Metrics Learnings From a SaaS CEO (Chris Cabrera)

  • Xactly GRR is 93% and NRR is 112%
  • Get to the Rule of 40 (% EBITDA + % growth) heavily on the growth side
  • Focus on getting your customers ‘referenceable’
  • Sometimes you need to do crazy things (unit economics wise) to sign a lighthouse account
  • 97% of customers do not opt out of allowing Xactly to anonymize and aggregate their data
  • Xactly centralized business analytics under a single individual who is a member of the executive leadership team

Performance Benchmarking Playbook (Lauren Kelley)

  • Magic number = (net new revenue) / (sales & marketing expense)
    • < 0.5 bad
    • 0.5 to 1.0 good
    • > 1.0 very good
  • SaaS benchmarks most affected by SMB or Enterprise model (higher for ENT unless noted)
    • ACV
    • NRR
    • GRR
    • CAC
    • CLTV/CAC
    • CAC Payback
    • Sales as % of revenue
    • Marketing as % of revenue (higher for SMB)
    • R&D (higher for SMB)
    • Sales compensation
    • Employee productivity
    • Subscription length

SaaS Sales Benchmarking (David Spitz)

Note: Marginally statistically significant (n=57; p-value = 0.13)

Bookings, Billings & Revenue: What’s The Difference & Why Do They Matter? (Brian Metcalf)

  • Booking date = date contract is signed
  • Billings date = date on invoice
    • Billing frequency (annual; quarterly; monthly)
    • Payment terms (how many days after the invoice date do they have to pay)
  • Revenue = income earned when your service is successfully delivered to your customers (see ASC 606)
    • Cannot recognize revenue until after the service start date

Storytelling in Finance: How to Present Your SaaS Metrics for Strategic Decision-Making (Bijan Moallemi)

  • Sales rep ramp (bookings over time)
  • Break NRR down by segment

How to Make Go-To-Market Metrics Actionable with Context (Scott Stouffer)

  • Context to make GTM metrics actionable
    • Metrics vs plan
    • Metrics over time (also note dates key changes were made)
    • Causality (ex: decompose into activity x effectiveness)
    • Significance (relative to other possible priorities)
    • Industry Benchmarks

CEO and CFO Metrics Collaboration (Nick Mehta & Alka Tandan)

  • Rule of 40 (top line growth + EBITDA margin)
  • CAC Payback (typically 18 to 24 mos)
  • Leading indicators of retention (GRR & NRR)
    • seat utilization
    • exec sponsor churn
    • failure to realize value
    • NPS
  • Types of SaaS
    • Infrastructure software (NRR ~ 130% to 200%)
    • Business application software (NRR ~ (100% to 130%)
  • Measuring the efficiency of CS
    • CS spend as a % of revenue (or ARR); or inverse, ARR/CSM
    • Accounts per CSM (by segment)
    • Activities (CSM utilization)
    • Customer engagement scores
    • CSQLs generated

Optimizing The Customer Lifecycle (Craig Rosenberg)

  • Growth
    • YoY ARR Growth
    • YoY GAAP Revenue Growth
    • iCAGR
  • Efficiency
    • Gross Sales Efficiency
    • Net Sales Efficiency
    • “Magic Number”
  • Churn
    • NRR
    • GRR
  • Burn
    • operating income (cash burn)
    • Rule of 40
  • Account-based funnel: Target accounts –> Engaged –> Opps –> closed won
  • Measure time to value as the time it takes to achieve a particular level of a Product Engagement Metric

Product-Led Growth and Metrics (Wes Bush)

  • Acquisition
    • Qualified visitors (esp. remove visits by current users)
    • Sign-ups
  • Activation
    • % of users who complete a specific engagement action tied to the promise of your product
  • Retention
    • Look at retention of activated users
    • Use engagement tiers, not just DAU, MAU
  • Revenue
    • % upgrade to paid from free (split activated and non-activated)
    • % upgrading to premium tiers
  • Referral

The Financial Foundation for SaaS Metrics (Ben Murray)

  • Tag every expense to a department
  • Strive to separate allocation of sales & marketing expenses between new and expansion

How to Operationalize the Advice: 5 Do and Don’t for building your Financial Tech Stack (David Appel)

(no key highlights from this session)

Usage-Based Pricing: Overrated Or Here To Stay?(Randy Wootton)

  • Include UBP in CARR

Usage-Based Pricing Metrics (Todd Gardner)

  • Remaining performance obligations (RPO) = contracted revenue not yet consumed or recognized whether billed or unbilled and can be in out-years
  • Average number of products per customer is a positive sign of retention
  • GDR and logo retention
  • Net expansion rate not great since it excludes churn
  • NDR with 2 year lookback introduces too much lag
  • Cohort retention can be based on different factors
    • Date acquired
    • How acquired
    • Segment (size, geo, vertical)
    • Product
  • The “ramp-up problem”: Assuming the rapid ramp NDR will persist into the slower mature expansion period
  • The usual LTV calculation has two problems (a) does not account for variable growth (b) does not account for time value of money

Key Commercial & Compensation Metrics to Drive Growth & Profitability (Rachel Parrinelo, Ted Grossman, Davis Giedt)

Note: These benchmarks based on companies $200M to $1B+
  • SaaS AE turnover was ~23% in 2021
  • ILAER = identify land adopt expand renew
  • Due to add-on measures, % of reps achieving target incentive (aka OTE) is higher than % of reps achieving quota
  • CSMs are usually on 70/30 or 80/20 comp plans

SaaS Pricing Model Evolution (Bryan Belanger)

  • Key concepts
    • Acquisition strategy (free trail, freemium, etc.)
    • Packaging strategy
    • Pricing model strategy
    • Price levels
    • Discounting

The Why, What and How Behind SaaS Metrics Standards (Ben Murray, Dave Kellogg, Ray Rike, Lauren Kelley, David Spitz, Todd Gardner)

  • Metrics Standards Structure
    • Definition
    • Business Value
    • Metrics formula (data inputs required; guidance points)
    • Calculation Timing
    • Considerations and Nuances
    • Calculation Example
    • Links to Related Standards

Privacy Policy