OPEXEngine

SaaS Cost of Goods Trending Down – By How Much?

OPEXEngine

Downward trending cost of goods (COGs) benchmarks are improving SaaS gross margins. Competitive service offerings and new technologies are driving down costs to maintain SaaS infrastructures. As SaaS gross margins are rising, investors are becoming a bit more savvy about gross margin analysis , with increasing scrutiny of SaaS financials, especially in the wake of the WeWork, Peleton and Uber IPO disappointments, some of which is blamed on gross margins below those of true SaaS vendors.

Balancing SaaS Growth and Profits to Maximize SaaS Company Valuation

OPEXEngine

The typical SaaS company grows faster, loses more money, and has a higher valuations than product sale companies. Weighted Average. Profitability. Cash Flow from Operations. Growth. Price/Revenue Ratio. Public SaaS Companies. -8%. Public Software Companies. +8%. Source: SEC filings – weighted average by company revenue.

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Are You Dying by the Hands of Analysis?

OPEXEngine

If there’s one thing a finance professional can do forever, it’s analyze stuff. We’re never short of data to analyze, and there are always more details to be ironed out. We love analyzing stuff so much that we almost forget the purpose of doing the analysis. The purpose is to improve business performance through improved decision-making. That means that the analysis must produce an outcome that can be presented and discussed with business leaders.

110% Net Dollar Retention Is The Benchmark

OPEXEngine

One SaaS metric we monitor closely is net dollar retention. It tells you what percent of revenue from current customers you retained from the prior year, after accounting for upgrades, downgrades, and churn. Formulaically it’s beginning of period revenue + upgrades – downgrades – churn all divided by beginning of period revenue. If that formula yields a number greater than 100%, then growth from your existing customer base more than offset any losses from that customer base.

Driving Discovery and Experimentation in your Organization

Speaker: Teresa Torres, Product Discovery Coach, Product Talk, David Bland, Founder and CEO, Precoil, and Hope Gurion, Product Coach and Advisor, Fearless Product LLC

If you want to build what matters, you can't move forward blindly. But to make progress, you can't let things slow to a crawl while you focus resources on gathering data. This is where continuous discovery and experimentation come in. Join Teresa Torres (Product Discovery Coach, Product Talk), David Bland (Founder, Precoil), and Hope Gurion (Product Coach and Advisor, Fearless Product) in a panel discussion as they cover how - and why - to build a culture of discovery and experimentation in your organization.

How much cash can your SaaS co burn?

OPEXEngine

Cash efficiency is one of our favorite metrics in SaaS. Measured as recurring revenue in the latest year / equity + debt invested, it’s every bit as important as growth. We did an analysis looking at the revenue, equity, and debt of 88 publicly traded SaaS companies at the time they went public. Using the equation above (revenue/[equity invested + debt]), we were able to observe the cash efficiency of each company. The conclusion: if you can generate $0.58 cents of revenue each year per $1.00

Does a Product-Led Growth Company Still Need a Sales Force?

OPEXEngine

Think about some of the online tools you can’t live without. Chances are, you backup your work to Dropbox, keep your colleagues updated on your progress via Slack, and automate your marketing emails with a service like Mailchimp. And what all these companies have in common, according to Forbes , is that they’re product-led growth companies.

SaaS Cash Conversion Score – What Does It Mean?

OPEXEngine

Last week, Bessemer released interesting new research regarding the return on invested capital. Three key take-aways from their analysis: Founders and CEOs should evaluate how effectively they are turning their capital into ARR instead of the size of their funding rounds. A new metric, called the Cash Conversion Score (CCS), shows the return on investment for each dollar ever invested in the company. Bessemer found that the CCS is a good indicator of internal rate of return (IRR) for investors.

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Favorite Reads from 2019

OPEXEngine

In my last blog of 2019, I’d like to share some of my recent favorite reads. Favorite Reads. The Power of Habit by Charles Duhigg. The difference between who you are and who you want to be is what you do.” Charles Duhigg. I had no idea this would be such a terrific book. It is a quick but powerful read. Duhigg describes the neurological science behind habit formation and how to use the process of habit formation to change them.

SaaS Company Benchmarking: Leveraging Metrics for Performance Insights

OPEXEngine

In the many years I’ve worked with SaaS companies, I continue to observe a surprising lack of standardization of SaaS metrics and performance reporting. My experience reinforces the fact that SaaS business model variants and approaches to measuring performance via metrics are still very much undefined. This is true even though selling software on a subscription basis has been around for well over 20 years. The Value of Benchmarking.

The Magic of Intent: Start Knowing The Goals of Your Users

Speaker: Terhi Hanninen, Senior Product Manager, Zalando, and Dr. Franziska Roth, Senior User Researcher, Zalando

It's important to know your users - what are their preferences, pain points, ultimate goals? With user research and usage data, you can get a great idea of how your users act. The tricky part is, very few users reliably act the same way every time they use your product. Join Terhi Hanninen, Senior Product Manager, and Dr. Franziska Roth, Senior User Researcher at Zalando, as they explain how they were able to reach a new level of user understanding - by taking their user research and segmenting their users by point-in-time intent. You'll leave with a strategy to change how your product team, and organization at large, understands your users.

Include ROI Analysis in Your Annual Budget Process

OPEXEngine

During the annual budget and planning process, SaaS Finance leaders focus on making sure that resources are allocated appropriately across the company so the company achieves its performance goals – usually revenue and profitability goals – for the upcoming year.

Non-US-Based SaaS Companies on the Rise

OPEXEngine

US SaaS companies need to take note of the growing number of world class SaaS companies based outside the US because the international landscape is shifting rapidly. Increased funding activity in Canada, Europe and Asia/Pac is introducing more non-US competition in the SaaS marketplace. More and better funded SaaS companies worldwide can be a challenge but also an opportunity for US firms.

Let’s Do Launch: Five Critical Moves for Your Next Launch

OPEXEngine

By excelling at these moves, marketers ensure that their message breaks through the noise. At a Glance. Getting a product, service or brand launch right matters more than ever for long-term success, which has become more difficult because of the proliferation of launches. Launch leaders have learned how to cut through the din of messages by focusing on five important areas in which to excel.

The Complete Guide to Understanding Net Negative? Churn

OPEXEngine

THE BIGGER YOUR SAAS COMPANY IS, THE LARGER THE SIZE OF YOUR SUBSCRIPTION BASE. AND THE LARGER THE SUBSCRIPTION BASE, THE MORE DETRIMENTAL CHURN BECOMES. As your subscriber base grows larger, the loss of revenue caused by even a low churn rate will begin to compound. The number of new bookings needed to replace the customers who are leaving becomes unachievable, and the struggle to keep your head above water becomes unsustainable.

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Encouraging Innovation in an Established Product Culture

Speaker: Richard Cardran, Chief Creative Officer and VP Strategy, HIA Technologies

Innovation is both a process and an outcome. The best way to begin innovating your products is by innovating your internal process. We'll explore the challenges, solutions, and hands-on techniques for becoming a successful "agent of change" within a well-established product culture. We'll examine the importance of UX and user-centric feature analysis, the adaptation of Agile Methodologies to the creative process, as well as a way to drive successful culture change for setting expectations and winning approvals with cross-functional stakeholders. Innovation and Leadership go hand in hand. Join Richard Cardran, Chief Creative Officer and VP Strategy, HIA Technologies, as we assess some case studies to see how to lead with a clear strategy well-defined tactics, and an unbiased understanding of the fundamental question: "why are you innovating?"

5 Financial Reports Every Business Should Be Running

OPEXEngine

Can financial reporting analysis really help your business grow? Absolutely! To employ a data-driven finance approach, CFOs need to move finance functions up the analytic value chain to offer more detailed analyses, better forecasting, and increasingly granular information on products, suppliers, customers, and more. In turn, their analyses inform the business, increase corporate agility, and point the way to cost savings.

Scale vs. Intimacy – The old trade-offs do not cut it in the era of scale insurgency

OPEXEngine

A widely held view on strategy in the 1980s defined two ways to compete: firms could pursue either a low-cost advantage (usually through scale) or a differentiation advantage (by building intimate customer relationships). The prevailing approach to running a firm at the time (what we call the professional management system ) was perfectly tuned to steer most large companies toward the low-cost, scale-driven option.

SaaS FP&A – Are You Up to the Challenge?

OPEXEngine

Heading into the 2020 planning season, SaaS FP&A teams are working to finalize 2020 budgets and planning. Over the past decade benchmarking software and SaaS companies , I’ve had the chance at OPEXEngine to work with hundreds of amazing Finance execs who work incredibly hard at getting the right data to support their company’s goals.

How to Determine the Best Value Metric for Your SaaS Product

OPEXEngine

SaaS pricing is difficult to master, and just a few tweaks to your strategy can have a huge impact on your revenue. Today, I’m looking at how you can determine the most appropriate value metric for pricing your SaaS product. WHAT IS A VALUE METRIC? A value metric is the metric that best correlates with where your buyer perceives value from your service. Note: I said buyer, not user ). Your value metric determines how you charge for your service, and how you limit each pricing tier.

Embedding Operational Reports: Everything Product Managers Should Know

Speaker: Dean Yao, Sr. Director of Product Marketing, Logi Analytics

Businesses are run with analytics - but companies continue to struggle with interpreting, analyzing, and distributing data. Operational reports help get information to the people who need it most, in formats they understand, and in a timeframe that matters. Join the webinar to learn how embedding operational reports can give your users a precisely formatted, ready-to-analyze view of their operational activities. World-class software teams are embedding operational reports to empower end users with interactive data visualizations, detailed information, and highly precise formats that can be shared via email, PDF, print, or online.

SaaS 2020 Planning: Global Market Trends

OPEXEngine

As the close of 2019 approaches, with extreme stock market volatility and mixed economic signals, SaaS Finance execs building plans for 2020 and 2-5 years beyond don’t have an easy time. What assumptions should you use among conflicting signals about economic and market growth over the next few years? Experts are fairly consistent that global and US economic growth will be modest. At the same time, continued high growth in the SaaS market is expected.

8 changes for FP&A to make to transform strategy

OPEXEngine

Eighty percent of economic profit created by companies globally comes from 20% of the companies. Yes, the Pareto principle applies here too! What’s the secret sauce for becoming one of the 20%? The bad news? There is indeed a sauce and a recipe for how to make it. The good news? The recipe is not a secret anymore!

More Focus on SaaS Gross Margins in 2020

OPEXEngine

SaaS gross margins have been getting attention lately as investors dig into SaaS cost structures and revenue growth rates going into 2020. Gross margin is simply revenue minus cost of revenue, expressed as a percent. Gross margin shows what is left over after you deliver your products and services. SaaS cost of revenue is comprised primarily of hosting and network costs, plus any professional services, implementation, training and other services.

How Advanced Analytics Is Changing B2B Selling

OPEXEngine

This article originally appeared on HBR.org. From targeted online advertising to more precise recommendation engines, consumer markets are bursting with innovation around machine learning and advanced analytics. While there’s less buzz around business-to-business markets, these innovations are changing the game in B2B as well, even in old-line industries selling what might be considered commodity products.

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Your 2-Part Metrics Audit for High-Value Products

Speaker: Sam McAfee, Product Development Consultant, Startup Patterns

You know what they say: what's measured improves. As product managers we're in a golden age of being able to get all sorts of metrics and run all sorts of experiments. But what are your measurements and analytics focused on? Are they really truly objective? Do they contribute to the ultimate vision of your product? And is everybody clear on that vision? Join Sam McAfee, Product Development Consultant, as he takes you through a two-part measurement audit. First, you'll learn how to make sure your measurements actually align with your product strategy. And second, you'll learn how to evaluate your culture of using measurements, so future experiments will more consistently provide high-value results.

Subscription Show Boston – November 4-6, 2019

OPEXEngine

The Subscription Show is coming to Boston in a few weeks at the World Trade Center. I’m thrilled to be speaking there about SaaS Metrics and Benchmarks. The show is 100% focused on subscription models, operations, pricing, marketing and subscription-centric technologies, and organized by Subscription Insider.

How To Keep Your Customers For a Decade. Or Longer.

SaaStr

Salesforce likes to talk about “Customers for Life”, and while that’s sort of catchy, it’s a little hard to grok what it really means. It finally sunk in for me a bit the other day.

5 Years and 300 SaaStr Podcasts with Harry Stebbings. A Look Back.

SaaStr

SaaStr just crossed 300 (!) podcasts led by our good friend and family Harry Stebbings. The first one launched on March 1, 2016 with Tiago Paiva, CEO of unicorn Talkdesk: SaaStr Podcast #001: Tiago Paiva, Founder On How Talkdesk Reached $3m in Sales Without Spending $1 on Marketing.

Startup Reads: 11 Books Every Early-Stage Entrepreneur Should Read

TechStars

I haven’t always been a big reader, but I’ve got more into it over the past few years of working with startups. In a past article, Five Pillars of Success: Curated Content for Early-Stage Entrepreneurs , I mentioned that last year I read 12 books.

Measure the Immeasurable: Beyond Vanity Metrics

Speaker: Sari Harrison, Product Management Instructor, Product School

As a product manager, it's your job to realize your product’s vision by executing your chosen strategy. It’s also your job to deliver value to the business. Ultimately, these two outcomes are aligned so the temptation is to focus primarily on business metrics. Doing this can cause you to lose focus on the real value you are trying to achieve, in favor of moving the vanity metrics such as launches and time spent. Join Sari Harrison, Product Management Instructor at Product School, as she explains how to use immeasurable success criteria along with your more standard KPIs to deliver products that don't just get used a lot, but deliver real value.

SaaS Will Hit $116 Billion Next Year. Wow.

SaaStr

Gartner has its latest Cloud report out , and while one can always pick at any report, it’s at least a well-resourced and reasoned source on the size of SaaS and the Cloud. The big learnings for SaaS founders and execs: Cloud overall will grow 17% next year to $266 Billion.

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Building an Investor Pipeline Spreadsheet: Keep Your Funding Flowing!

TechStars

As the Managing Director of Techstars NYC and investor in 120+ companies , I’ve helped dozens of early stage companies connect with investors. But all too often I’ve watched founders struggle with fundraising —- pitching the wrong deal, to the wrong investor, at the wrong time.

As a venture capitalist, what are some red flags that would make you reject a startup immediately?

SaaStr

Q: As a venture capitalist, what are some red flags that would make you reject a startup immediately? First, there is a lot of marginal behavior that doesn’t lead to an immediate rejection, but does lead to immediate skepticism: Metrics that don’t quite make sense.

How to Set Up and Optimize Your SaaS Sales Funnel So It Doesn’t Let You Down

Incredo

Say you want to know how videos can help you increase the impact of your social media ads. You searched it on Google, found an article on a video software provider’s blog, and clicked on the headline. At the end of the post, you saw a freebie on a similar topic.

Build Delightful Products with Customer Validation

Speaker: John Little, Head of Product Marketing, Centercode

When it comes to delivering a solid product/market fit, customer validation is key. After all, you want to provide customers with a product that not only fills the need, but is delightful -- right? To get there, you need to commit to a vital blend of market research, strategy, and user testing. Join John Little, Head of Product Marketing at Centercode, as he explains a two-part approach to customer validation. First, how do you strategically identify your top product areas that need attention prior to release. And second, how do you turn user data into strategic priorities that help the right teams make the right decisions.

How to Build a $100 Billion SaaS Company

SaaStr

Today, there is 1 $100B+ SaaS Company, Salesforce. Just one. We could add older companies like Adobe, Microsoft, etc. but they aren’t pure SaaS plays. Salesforce is the “only” $100b+ pure-play SaaS company. But it won’t be the last.