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Benchmarks: SaaS IPOs Not S&M Deviants

We took a few leading public SaaS companies and compared their financials in the year that they went public. It was really interesting that despite the fact that these companies went public in different years, with different macro-economic environments ranging from SalesForce’s IPO in 2004 to Cornerstone on Demand and Jive in 2012, there was only a slight variation in S&M spend.

March 5, 2013

Interpreting SaaS Cost of Customer Acquisition

SaaS Cost of Customer Acquisition (COCA) is one of the most critical SaaS metrics in determining whether a SaaS business is building a profitable business or not. COCA includes all sales and marketing expense aimed at bringing on new customers. In small and midsized companies, COCA is typically calculated as all sales and marketing expenses from a previous quarter divided by the number of new customers in a quarter.

February 24, 2013

Interpreting SaaS Churn Metrics

Every SaaS business wants to have very low churn rates. Public SaaS companies often release renewal rates in the mid- or even high 90 percent range, without giving any detail about how the number was derived. But how do you interpret SaaS churn metrics?

February 18, 2013

Keep Customer Churn Rate Under Control

If you are a SaaS company, you surely watch customer churn rate like a hawk. When your company is working hard to add new customers, and then losing a good portion of them every year, that’s a bad thing. It says a few things about your business.

April 23, 2012

Benchmarking Drives Faster Growth of Software and SaaS Companies

Fast-growing software and SaaS companies don’t navigate their growth by luck. Successful companies today are intensely metrics driven and constantly compare their performance to peers and market. Have you ever felt that critical executive or board-level decisions about sales spend, performance targets and other business drivers are based on anecdotes and emotion more than data? Benchmarking your software or SaaS company’s financial and operating performance will make you perform better, improve your decision-making process and position your company for faster growth. This article shows how many vendors are benefiting from routinely benchmarking their performance and how some critical software benchmarks have evolved over the past five years.

March 26, 2012

'Tis the Budget Season

Most companies are now preparing their 2012 budgets and going through the approval process. To say the least, few people enjoy the budget process. It is often long and drawn out to the point where many managers involved in the process are just relieved that it is over, regardless of whether they agree with the numbers.

December 14, 2011

Defining Cost of Customer Acquisition

We’ve been tracking COCA for SaaS companies for about 5 years now. We use the metric to calculate benchmarks for customer acquisition expense by size of company, and by type of product offering, ie., whether a company is selling a low cost solution or a relatively high cost solution. We incorporate COCA into other benchmarks as well. For example, we can use COCA to look at whether customer acquisition expense for new customers has increased or decreased over the years, what the “pay back” period is for new customers, and what the customer profitability benchmarks are.

November 16, 2011

Benchmarking Value - One Company's Perspective

I thought it would be worthwhile to publish an interview I did earlier this year with Mike Morgan, CFO of Bomgar Corporation talking about benchmarking value and how it has worked for them. Bomgar is a venture-backed, mid-sized software vendor which has ranked in the Deloitte Technology Fast 500 for the past 4 years. With over 20 years experience in the high tech and the telecomm industries, Mike oversees accounting, finance, legal, human resources and IT operations.

June 16, 2011

How CFOs can supercharge their organization's sales forecasting

Even for the most seasoned corporate finance professionals, accurately forecasting performance is challenging. Developing a reliable lens into future performance is a critical task that drives a company’s success, enabling strategic planning and limiting surprises. Cost forecasting has its own unique challenges, but generally, an organization has more control over how much it spends than how much it sells. This guest post from CFODive the challenges of legacy sales forecast processes and how to overcome them.

January 1, 2010