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SaaS Churn % Impacts Your Company Valuation

In a recent article from Todd Gardner and team at SaaS Capital, the impact of how different renewal rates affect both total revenue and revenue growth rates is laid out clearly. They calculate that a 1% difference in churn can have a 12% impact on valuation in five years, so imagine the impact if the change in churn is 5 or more percent.

July 17, 2015

When Customer Lifetime Value is a Moving Target

With any analysis, it is only relevant if you understand how the data was calculated and the context of how it relates to your business. The data has to be credible for the analysis to be useful. And when comparing to benchmarks, it becomes doubly important to make sure that both the benchmarks are credible and that your data accurately represents your business. Customer Lifetime Value (CLV) is one of the key SaaS metrics used to define whether a company is building a healthy business based on a profitable customer revenue stream. CLV is calculated by multiplying Average Monthly Recurring Revenue (MRR) for a Customer times Gross Margin over Churn (1/churn = the customer lifetime).

May 23, 2015

Ask the Experts - ROI versus ROE

The social media world and business advisory firms, consultants and other pundits keep alerting businesses that the objective of return on investment (ROI) is diminishing in importance, or even dead, due to the increasing focus on return on user experience (ROE or ROX). We asked three experts to share their advice on ROI versus ROE as it pertains to software companies.

May 5, 2015

The Second Highest Cost in Running a SaaS Company

COGs are the second highest expense bucket for most SaaS companies. If you aren't continuously delivering problem-free, high speed and secure access to your SaaS product, customers won't stay. Delivering high performance to an exponentially growing subscriber base costs a lot, which drives up COGs. In addition, you need to invest in your hosting platform ahead of the growth curve. Sales and Marketing gets a lot of deserved attention as the number one expense category, but COGS deserves close attention as the #2 most expensive area in running a SaaS company, given the dollars and significance to growth and renewals.

March 18, 2015

The Value of Benchmarking

After 8 years working with hundreds of SaaS and software companies (and about 60% of the SaaS IPOs over the past 5 years), one of the key ways that growth companies use our benchmarking data and services is for planning and budgeting.

January 29, 2015

How Fast Growth SaaS Companies are Getting to $100M

In the following Q&A, Lauren and David share lessons from each of their 25 years of technology management, tailored for SaaS companies on how fast growth SaaS companies are using key metrics to grow their businesses.

December 22, 2014

2015 Predictions for SaaS Business Models

2015 is fast approaching and it will be a big growth year for software and SaaS companies. Here's OPEXEngine's predictions about how SaaS business models will evolve in the new year, as well as Nicholas Negroponte's always insightful thoughts about future trends.

December 15, 2014

CFOs Aren't Overly Sharing Types

I recently attended the 12th Annual MIT Sloan CFO Summit, which, as always, was great. The title, the Future Forward CFO, articulated the theme that CFOs have moved from reporting the past to helping shape their company’s future. A CFO’s position has grown beyond reporting accurate financial statements and historical analysis to proactive strategic planning, and essentially replacing the COO in overseeing on-going company operations. The CFO should be right in the middle of the strategic conversation within the company; s/he has the analytical staff and deep understanding of the nuts and bolts of the business model in order to take a more proactive role.

November 25, 2014

How Professional Services Gross Margins Are Impacting SaaS KPIs

Professional services for many SaaS companies have become an important way to on-board customers, keep customers satisfied with the product and using more features of an application or service, making it stickier. As one CFO recently said, professional services are definitely a churn-reducer. SaaS companies, particularly high growth, venture-backed firms, are pricing professional services as a loss leader, at cost, or even below cost. We have been seeing negative gross margins on professional services from some companies.

November 12, 2014