How Do B2B SaaS Companies Count their Customers? Let Me Count the Ways

Yesterday, at the Boston SaaS Finance Meet-Up for the SaaS and Software benchmarking community, we discussed some of the issues with determining customer count for B-2-B SaaS companies.  Last week, the same question came up at our San Francisco SaaS Finance Meet-Up as well, so it is clearly an issue.  Many companies, especially those selling […]

By Lauren Kelley | December 14, 2018

When I first heard about the Lifetime Value (LTV) to Customer Acquisition Cost (CAC) metric many years ago, the economics major in me got very excited. I was already well into the SaaS financing business at the time, and this ratio seemed like the most elegant way to express how the business model really worked. […]

By OPEX Engine | December 11, 2018

Best in class SaaS CFOs measure the percent of R&D spend associated with tech debt, just like they track financial debt.  Tech debt simply defined is the accumulated cost of development short cuts and outdated technology.  It is the interest a company pays for trade-offs made between quality and time to market – short cuts […]

By Lauren Kelley | December 7, 2018

Customers will pay you to build your SaaS product. It’s one of the great advantages of a SaaS model. Annual prepay contracts – wherein customers pay for a year’s cost on day – is a free loan from customers. And every startup can benefit from this advance. There’s only one requirement: you must be able […]

By OPEX Engine | December 4, 2018

Savvy SaaS CFOs know that the best way to prepare for board approval of the next year’s budget and plan is to set the stage before the meeting.   This is the time of year when most SaaS companies are compiling and finalizing budget numbers. The hard work of getting Executive team agreement on the final resource […]

By Lauren Kelley | November 30, 2018

Your startup is just getting off the ground. You might have a few account executives and a sales leader in place; maybe some revenue and a handful of customers. The sales team costs real money, and the question before the company is: how do know what quota plan to assign to the account executives? I’ve […]

By OPEX Engine | November 27, 2018

SaaS entrepreneurs have to go out on a limb and spend to grow.  That’s a fact of the SaaS world.  At the same time, spending before revenues come in and investing in growth is a big risk, and it requires tight discipline, like walking on a narrow balance beam requires tight discipline not to fall […]

By OPEX Engine | November 20, 2018

A really smart and experienced investor said to me the other day that with these 3 things, he could absolutely increase any SaaS company value (and would invest in doing so): The right operational data about the company and good, comparable benchmarks, Intelligent interpretation of the data, especially around go-to-market Improved business processes focused on […]

By Lauren Kelley | November 16, 2018

Scaling a startup from zero to $100M is 10% strategy and 90% execution. You’d never know that from reading the Web, because the advice you’ll find online is 90% related to strategy and 10% related to execution. This is the second post in a series that explores the challenges of scaling a startup through rapid […]

By OPEX Engine | November 13, 2018

Every vendor, from early to enterprise stage, must have a laser focus on SaaS cash management in order to survive.  The lag times caused by the subscription payment model, PLUS the intense customer acquisition growth pressure in order to succeed in the market, makes cash burn tough to manage. In SaaS, spending cash usually comes […]

By Lauren Kelley | November 9, 2018

I think it would be hard to overemphasize the importance of upgrade and upsell strategy in SaaS product marketing. In an industry where free trials, freemium versions, bargain basement subscription prices and simply hoping to recover customer acquisition cost with first year revenue are the norm, few things are sweeter than a customer that actually […]

By OPEX Engine | November 6, 2018

Earlier this week, we published a blog by Tomasz Tunguz, How the Economics of Professional Services Have Changed in Software. He demonstrates that professional services strategies and gross margins vary widely across public SaaS companies and have done for some time in the SaaS world. Despite large variances in professional services metrics, public SaaS companies […]

By Lauren Kelley | November 1, 2018

A founder asked me recently if there were any trends in the economics of professional services across public SaaS companies. I had examined the gross margins and share of revenue from professional services about 3 years ago. Professional services are consulting fees software companies charge to customers for software configuration, customization and education. What has […]

By OPEX Engine | October 30, 2018

The OER (Operating Expense Ratio – ratio of operating expense to revenue) is a traditionally viewed as a measurement of efficiency. It can be translated to mean the dollars required to produce one dollar of revenue.  Typically, that dollar of operating expense was 90 percent payroll components. For early stage companies, the OER may be 3X.  […]

By Lauren Kelley | October 25, 2018

From time-to-time, you may need to find consultants to help you with your business.  Sometimes, those needs are high level, like setting strategies or marketing plans.  And, other times, those needs are more point solutions, like a pro in search engine optimization or product sourcing.  Whatever your need may be, there is most likely a […]

By OPEX Engine | October 23, 2018

In early markets, customers prefer entire solutions, not best in class point products. These solutions often include significant professional services and education. At the beginning of a new wave, most customers don’t understand the technology well. So, they seek experts to guide them. Companies that provide services and education often win the early market. They […]

By OPEX Engine | October 18, 2018

Here’s a super interesting perspective from Sunir Shah, founder of the Cloud Software Association, a 2000 member organization dedicated to promoting partnerships and business development among SaaS companies that we like a lot.  From the early SaaS days when few believed the SaaS subscription business model could support partners and indirect channels, the SaaS partnership […]

By OPEX Engine | October 16, 2018

I’ve written quite a bit about the public market software multiples. They’ve increased to near historic levels with forward revenue multiples approaching 9x. As the public markets have appreciated, something has happened that I didn’t expect. Some public companies are now fetching the mulitples of the most attractive private companies. I thought valuations between the […]

By OPEX Engine | October 10, 2018

Employee productivity is an oft overlooked performance benchmark in fast growth tech companies. It is easy to calculate – divide revenue by number of employees.  The calculation is the same regardless of the business model.  The simplicity and consistency of how the metric is calculated is attractive and helpful in calculating the revenue potential of a […]

By Lauren Kelley | October 4, 2018

About two years ago, Marketo was publicly traded and valued at roughly $1.1B. Vista Equity paid $1.8B to take the company private, a 64% premium. At the time it was taken private by Vista, Marketo generated $241M in trailing revenue, growing at 35% annually. Its net income margin was -31%. Last week, Adobe announced they […]

By OPEX Engine | October 2, 2018

Harvard Business Review published an article last year describing a new method they dubbed the Customer Based Corporate Valuation (CBCV) method focused on SaaS valuations and subscription companies. CBCV takes a “bottoms-up” approach to determining a company’s value, focusing on its customer base and the value of its customers.  By contrast, traditional valuation methods take a […]

By Lauren Kelley | September 27, 2018

As many of you know, Red Rocket has been looking for a businesses to buy.  We have previously written about all the challenges that come with buy-side mergers and acquisitions work.   But, there is a new wrinkle we have been running into, that is worth talking about.  Most businesses we have looked at were […]

By OPEX Engine | September 25, 2018

For SaaS companies targeting fast growth to $100M and beyond, the company’s data management of its own business information can enable the growth path or bog it down.   Manual and “heroic” efforts to get the data out of business systems for reporting and analysis will get harder and harder to do as systems, records and […]

By Lauren Kelley | September 20, 2018

It seems a little late in the game for me to be asking a question like “What is SaaS?” But, I’ve always harbored a few embarrassing little secrets on the subject and I think it’s time I came clean. There is a classic Harvard Business School case study called Marketing Myopia by Theodore Levitt that […]

By OPEX Engine | September 18, 2018

You hear the terms SaaS, subscription, term licenses and perpetual license software tossed around frequently.  The terms aren’t universally understood, nor are the implications of each on the financial model of a company, so the following is an effort to provide an overview. At OPEXEngine, we pull apart the different nuances of each business model […]

By Lauren Kelley | September 13, 2018

Your sales team is starting to close some terrific accounts. As your startup grows, your sales team will experiment with different sales techniques. For example, qualification, pricing, positioning, incentives and contract structure. This is a wonderful phase for a startup. However, there’s a common mistake to avoid. Your VP of Finance should model the impact […]

By OPEX Engine | September 11, 2018

Numbers provide us a certain certainty. With their precision, they offer a sense of black and white, in or out. But, data and benchmarks alone aren’t enough. All the quantitative analysis in the world won’t lead me to the next great idea for startup. Those figures can’t create empathy, develop the right culture, or hire […]

By OPEX Engine | September 6, 2018

Good SaaS CFOs manage increasingly complex organizations and responsibilities.  The Finance organization has grown to be one of the strategic assets of a SaaS company, managing the  numbers, planning for growth, contributing to strategic changes in Sales, Marketing and even R&D, not to mention closing the books every month, quarter and year. SaaS Finance:  One […]

By Lauren Kelley | September 5, 2018

As a SaaS business matures, the importance and value of SaaS metrics increase. Most SaaS businesses begin their journey down the SaaS metrics path by tracking recurring revenue in relation to customer acquisition costs. After building a solid customer base, churn becomes a priority. These fundamental SaaS metrics are all apparent in the standard SaaS […]

By OPEX Engine | August 30, 2018

In honor of the last, hot days of summer and our love of Labor Day data and statistics, we dedicate this content to Labor Day in the U.S. on Sept. 3rd. The first observance of Labor Day was likely on Sept. 5, 1882, when some 10,000 workers assembled in New York City for a parade. […]

By Lauren Kelley | August 29, 2018

SaaS customer acquisition cost (CAC) is one of the key indicators to define a profitable SaaS business model.  The difference between customer acquisition cost and the lifetime value of a customer defines the value of the business. CAC is defined as the cost involved in acquiring one new customer.  The easiest way to determine customer acquisition […]

By Lauren Kelley | August 23, 2018

Over the last several years, many technologies have been developed to help accelerate and automate the sales and marketing functions. First, it was upper funnel tools that help drive customer awareness and consideration through marketing automation. Then came the middle and lower funnel tools that help drive customer evaluation and purchase through sales enablement tools, which I will […]

By OPEX Engine | August 21, 2018

Fifteen years ago, software company financial plans followed standard guidelines about sales and marketing expense targets. Traditional software sales and marketing expense aimed for 22%-25% of revenue, maybe 28-30% if strong revenue growth warranted it.  Anything north of that required a really good explanation for why and how the numbers would be reduced.  SaaS financial […]

By Lauren Kelley | August 17, 2018

You’ve just raised a round of financing. Your next step is to build your management team. There are several criteria hire an executive. Competency in the field, cultural fit, communication skills, management experience. All of those should be obvious. There is one that is often overlooked. Network. Recruiting is one of the most important responsibilities […]

By OPEX Engine | August 16, 2018

I have written many posts about the importance of determining your industry size for strategic planning or investor pitch purposes.  But, determining your industry size is not always easy, and more importantly, determining your total addressable market (which I will define later), is even more important and an even more nebulous calculation.  So, here is […]

By OPEX Engine | August 9, 2018

In 2007, when OPEXEngine launched its first benchmarking of SaaS vendors, almost no SaaS companies in the data set were selling to end-user customers through a channel. Over a decade later, that statistic has changed dramatically. In the early days of SaaS, the idea was that subscription pricing did not allow a partner margin, so almost […]

By Lauren Kelley | August 7, 2018

I met a seasoned executive recently. He made a bold claim. “Management is an art, and one that is overwhelmingly undervalued in Silicon Valley.” I wondered, are we investing enough in our managers? Talent is the largest investment of an early stage company. 80%+ of startup operating expense flows to compensation. Retaining these employees is […]

By OPEX Engine | August 2, 2018

Hiring and retaining skilled and productive employees in SaaS companies is an ongoing, competitive exercise.  Human assets are the biggest investment and a huge driver of SaaS company valuations – but a lot of organizations don’t check SaaS HR benchmarks regularly or keep it in front of management the way they do customer lifetime value, […]

By Lauren Kelley | July 31, 2018

Recently, people have been asking just where are we in the SaaS valuation cycle. I last updated the chart above more than six months ago. The answer is close to ten year highs. The chart above shows the median enterprise value to forward revenue multiple to multiple. Enterprise value is the market of a publicly […]

By OPEX Engine | July 19, 2018

When I’m not completely absorbed with my agile marketing software startup, I do a bit of SaaS consulting on the side. SaaS colleagues come to me with a wide variety of problems from positioning to sales compensation to churn analysis, but lately I’ve noticed a common theme: poor SaaS customer alignment. SaaS businesses develop intimate, […]

By OPEX Engine | July 12, 2018

The SaaS IPO and M&A market is extraordinarily strong.  Venture and PE capital inflows to SaaS companies also continue to be strong. With the second half of 2018 approaching for most SaaS and software companies, it is time to review and tweak second half budgets and plans. Now is a great time to benchmark your KPIs […]

By OPEX Engine | June 26, 2018

There are five forces driving the startup ecosystem today. They are working together to reinforce a high valuation environment. These forces are: An infusion of capital into Startupland. There are many reasons for this. The money supply in the US has doubled in the last 10 years. A low interest rate environment means a low […]

By OPEX Engine | June 21, 2018

Growth is the primary driver of value for early- and mid-stage SaaS companies.  In subscription models, you invest in revenue acquisition up – front and then generate value over time by managing churn. Acquiring new recurring revenues burns cash, mostly in Sales and Marketing. SaaS executives need to understand how efficient their organizations are in […]

By OPEX Engine | June 19, 2018

Choosing the right go-to-market sales model for your SaaS startup can be a make it or break it decision. Choose right and you grow smoothly from seed funding to A round to B round and beyond. Choose wrong and you spend precious cycles chasing your tail as cash runs out. While most B2B SaaS startups […]

By OPEX Engine | June 14, 2018

Over the past 12 months, a number of our benchmarking customers have either filed or completed SaaS IPOs. And Adaptive, a customer and partner, filed for an IPO in May and then announced in a surprise move on Monday its acquisition for $1.55B by enterprise SaaS company Workday for more than double (2.2X) the expected post […]

By OPEX Engine | June 12, 2018

SaaS companies track income with a variety of different metrics, and it can be confusing.  Some companies track bookings, ARR and recognized revenues, others track billings.  Sometimes companies only include recurring revenues when they talk about bookings or billings, but they also sell Professional Services (and must book and bill them somehow).  Definitions and reporting […]

By OPEX Engine | June 5, 2018

Intelex, a Canadian-based global leader in Environment, Health, Safety and Quality (EHSQ) SaaS, with offices in Toronto, Denver, and the UK, uses OPEXEngine’s SaaS Benchmarking platform, BenchmarkEngine™, together with Adaptive Insights budgeting and planning solution to drive operational analysis enabling fast growth. Intelex has grown to 500 employees with global offices and over 30 percent […]

By OPEX Engine | May 29, 2018

Company X is a fast growth SaaS company, surpassed $20M ARR in 2017 and on a plan to hit $35M ARR in 2018, and $50M ARR in 2019.  Their growth plan is based on: more enterprise customers; opening an office in Europe/UK and increasing European revenue to 15% of total revenue; and adding new functionality […]

By OPEX Engine | May 21, 2018

Last week, Hubspot announced strong Q1’18 results of 39% revenue growth and 44% customer growth.  These are great growth numbers, but more importantly, Hubspot announced a major evolution in its growth strategy. Here is how one successful SaaS vendor is evolving its model. Hubspot invented and evangelized the term “Inbound Marketing,” dramatically influencing the SaaS playbook […]

By OPEX Engine | May 15, 2018

Sales is the revenue engine of any B-2-B SaaS company and thus absolutely critical to company growth. Sales is also often the biggest single departmental expenditure in the company – another reason why Sales efficiency is critical to ensure companies are getting the best productivity for their investment in the Sales organization and everything the company […]

By OPEX Engine | May 8, 2018

SaaS G&A expense is surprisingly high.  Unlike traditional software companies where G&A expense was expected to be in the 12-14% of revenue range at the time a company went public and then drop to 8-10%, SaaS companies present G&A expense between about 15% to 20%, and sometimes more, of revenue.   Why is this and what […]

By OPEX Engine | April 30, 2018

Subscription revenue management SaaS vendor Zuora’s IPO on Thursday, priced at $14, closed at $20 and valued the company at $2B.  2018 is shaping up to be a banner year for B-2-B SaaS IPOs:  Dropbox and Zuora already have listed, Docusign, Pluralsight, Smartsheet have filed and Qualtrics, Apttus, Github, SurveyMonkey and Slack are expected to […]

By OPEX Engine | April 17, 2018

Women in tech are becoming more common every single day, but there is still significant disparity when it comes to what salaries are being offered to women versus men for the same technology jobs. recently released their third annual report, The State of Wage Inequality in the Workplace. is a tech hiring marketplace […]

By OPEX Engine | April 11, 2018

Pricing in the SaaS world is particularly complicated. Pricing can make or break your SaaS company with its impact on both profitability and revenue growth – the two major indicators of company valuation. SaaS pricing is a fast-moving target and every SaaS CFO should be re-evaluating their company’s pricing on a regular basis.  As a […]

By OPEX Engine | March 19, 2018

OpFocus recently met with fellow SaaS maven & long time friend, Lauren Kelley, who founded OPEXEngine a decade ago in Waltham, MA and built it into the premier Software as a Service SaaS benchmarking resource. Lauren’s held executive positions of her own in some of the industry’s most successful companies, and having advised hundreds of forward-thinking technology […]

By OPEX Engine | March 11, 2018

Last week, (CRM) announced their FY 2018 results. The data indicates strength of their expansion model. Here’s why. SaaS companies, as well as investors in SaaS, watch Salesforce the original pioneer of the SaaS model.   The “No Software” company is the largest fast growth SaaS company in the world, keeping the momentum going even […]

By OPEX Engine | March 4, 2018

The importance of unit economics and the associated metrics (CAC, LTV, LTV/CAC ratio) is well established in the SaaS world.  But how you calculate your operating numbers isn’t as well understood – these critical non-GAAP metrics aren’t consistently defined.  And changes in calculations – not the business – can have a real impact on your […]

By OPEX Engine | February 27, 2018

Coming back from the annual SaaStr mega conference in San Francisco, it is clear that SaaS is huge, it is expanding and it is going to impact companies both in the United and States and abroad. The Expanding SaaS Sector The rapidly expanding SaaS sector numbers something like 10,000+ revenue-earning vendors.    While the majority of […]

By OPEX Engine | February 19, 2018

One of the hottest trends in the evolving SaaS playbook is the influence of Account Based Selling (ABS) and Account Based Sales Development (ABSD). The Account Based approach changes two important aspects of growing a SaaS company:  firstly, it changes business processes and secondly, it changes organizational structures.  The focus is to pull together Marketing, […]

By OPEX Engine | February 12, 2018

I’m jazzed to spend this week at SaaStr 2018 annual mega conference & SaaS gathering in San Francisco.   Over 10k + founders, VCs, and execs will be participating in the 3-day conference. The organizers have focused on including women and “under-represented” groups—40% of the speakers are women and 60% altogether between women and under-represented groups.  […]

By OPEX Engine | February 5, 2018

2017 was a banner growth year for SaaS companies, and particularly for SaaS vendors that went public over the past 12-18 months.  Based on OPEXEngine’s data feed of analyst revenue expectations for the next fiscal year filings, top performing SaaS companies’ annual revenue growth rates keep climbing and it appears as if they will beat […]

By OPEX Engine | January 29, 2018

SaaS companies are all about fast revenue growth and great products.  Most discussions about SaaS models focus on Sales and Marketing – in fact we wrote a post about it last week, but what about R&D (Research & Development)? You can’t have fast growth without great products, so how do you measure SaaS R&D performance?  We […]

By OPEX Engine | January 22, 2018

Last week we looked whether all SaaS companies benefited from the incredibly hot stock market in 2017.  We found big variations in Market Cap to Revenue multiple trends.  Some companies doubled their market valuation multiple during 2017, and some at the bottom of the spectrum reduced their multiple by almost half.  This week we’ll look […]

By OPEX Engine | January 16, 2018

2017 was a successful year for Cloud companies. At the same time, the stock market hit historic highs – the Dow increased by 25% and NASDAQ increased by 28%.  We noticed some interesting trends regarding which companies benefited the most from market cap valuation increases in 2017. Why did some SaaS companies get an incredible […]

By OPEX Engine | January 7, 2018

Adaptive Insights and OPEXEngine announced an agreement that underscores the companies’ joint commitment to providing best-in-class benchmarking data to software-as-a-service (SaaS) and software companies. AdaptiveInsights, the leader in strategic corporate performance management (CPM), and OPEXEngine, the principal independent benchmarking platform for software and SaaS companies, can now better serve their mutual customers’ needs.  Under terms […]

By OPEX Engine | August 14, 2017

Are we any good at SaaS product investment? No, not really.   I looked at 145 public and private SaaS companies with revenue of $5 million and greater in conjunction with the team at OPEXEngine.  Our goal was to find a relationship between product spending and payback once companies achieved product market fit.  What happens […]

By OPEX Engine | June 26, 2017

Most SaaS companies know that to run your business profitably, it is important to measure SaaS CAC.  Yet, managing this metric over time can become increasingly complicated as a company expands its operations and divides its resources into both acquiring and retaining customers.  Calculating SaaS CAC correctly is not as simple as dividing total Sales […]

By OPEX Engine | March 1, 2017

  We are frequently asked “how are companies allocating Customer Success expense” and where does the Customer Success organization sit among peer companies.  This issue often comes up among SaaS finance executives at the SaaS Finance Meet-UPS that OPEXEngine runs.  I’ll share some of what we’ve seen here.   We will continue to be working this evolving […]

By OPEX Engine | January 25, 2017

The SaaS business model requires the integration and coordination of far more operations than traditional software models.  R&D, Sales, Marketing, Customer Success, Finance, and Operations all need to work together to produce profitable unit economics which are the basis of a successful SaaS company.  The annual budgeting practices process is a methodical way of allocating […]

By OPEX Engine | November 22, 2016

Does your company provide free food for all employees every day or just on Wednesdays? Concierge services?  FastPass payments?  Free beer and wine?  Doggie day care?  Massage, acupuncture – the list goes on.  Tech companies large and small provide some of the most extensive company employee benefits for their employees in the competition for the […]

By OPEX Engine | October 28, 2016

On the last day of August, as we go into the final stretch of Q3 and 2016, SaaS valuations are evolving.  Benchmarking the financials and operating metrics that drive these valuations is what OPEXEngine, the member-based benchmarking community for SaaS companies, is all about.  Forward multiples have rebounded for companies maintaining strong revenue growth at […]

By OPEX Engine | August 31, 2016

About 3/4ths of Sales expense is spent on sales compensation. Companies have always spent huge amounts of time and resource fine tuning their sales structure and organization but in the SaaS world, it is even more complex.  SaaS companies have to compensate for recurring revenues, renewals, find the right mix of incentives, targets and sales […]

By OPEX Engine | June 30, 2016

Every CFO conference that I’ve been to in the past 5 years stressed the emergence of the CFO as a strategic leader of the company.  Study after study affirms that today’s CEOs expect CFOs, especially in the tech sector, play a strategic role driving company growth rather than just accounting for past performance and policing company […]

By OPEX Engine | May 18, 2016

There are millions, okay, hundreds, of benchmarks floating around these days.  Sales productivity should be a, b or c funnel conversion rates are typically such and such a percent, or churn rates have to be no more than x or your company is in big trouble.  Whatever the metric, someone has a definitive answer for […]

By OPEX Engine | March 29, 2016

Who does sales ops report to within your organization? According to Lauren Kelley, your company’s sales ops may be sitting in the wrong department. Kelley is the CEO and Founder of OPEXEngine, a member-based SaaS benchmarking company. She was previously the SVP of sales and operations at ATG, later acquired by Oracle, and also spent two […]

By OPEX Engine | March 23, 2016

If a company can sell 1.5 deals in the time it previously took to sell one deal, you have 50% more revenue.  All other things being equal (ie., you don’t increase churn, increase discounting, etc), if you tighten up your sales cycle, you’ll increase revenue. There’s a fair amount written on SaaS sales cycle lengths […]

By OPEX Engine | February 29, 2016

Benjamin Graham, father of value investing, famously described the stock market as a “voting machine.”  His star protege, Warren Buffett, would later expand that to “a voting machine over the short term, and a weighing machine over the long term.”  What the heck was Graham talking about, and why did Mr. Buffett feel the need to […]

By OPEX Engine | February 8, 2016

Will risk adverse investors in both the private (VC and PE) and public markets this year impact SaaS operating benchmarks like revenue growth, profitability, hiring and a host of other operating metrics in 2016?  We’ve been getting calls from a number of saavy CFOs asking to see SaaS operating benchmarks from 2009 and 2010, just […]

By OPEX Engine | January 28, 2016

In a recent forum dedicated to software and SaaS Finance leaders, organized by the SIIA and sponsored by OPEXEngine, Netsuite, Intacct and Grant Thornton, one of the best discussions dealt with preparing for and managing the optimal M&A exit for your company, with CFOs from acquired companies and M&A advisors from Grant Thornton. Key Takeaways: […]

By OPEX Engine | December 22, 2015

We frequently have customer conversations where we discuss how things are moving around a SaaS income statement;  hosting costs into COGS, headcount from R&D to other departments, things like that.  Meanwhile, in another part of The Cloud, there are some large, important blocks of capital moving between  a companies balance sheet. The form of the capital is data […]

By OPEX Engine | November 23, 2015

Tech companies are all about innovation – how obvious is that?  And how well you run your R&D innovation and processes is a major determining factor in a company’s success, no more so than in the fast moving world of SaaS technology.  No matter how good your Sales and Marketing functions are, they need to […]

By OPEX Engine | October 28, 2015

Annual Study Finds Private Software Industry and SaaS Firms Seeing Strong Growth,  More Hiring and Significant Venture Capital Flow. One year after reporting that private U.S. software companies saw the largest revenue gains since the recession of 2008, the 2015 Software & SaaS Industry and Benchmarking Report shows even greater acceleration in topline growth. Announced today, […]

By OPEX Engine | September 29, 2015

The recession of 2008 took its toll on many different industries and the software industry was certainly no exception. With the recent release of the 2015 Software & SaaS Industry and Benchmarking Report on Sept. 10, produced by OPEXEngine, in partnership with the Software and Information Industry Association (SIIA), it was revealed that the software […]

By OPEX Engine | September 24, 2015

We announced recently that average annual revenue growth for the fastest growth private SaaS companies had jumped from last year’s median of 100% to this year’s 150% annual revenue growth.  The press release got a lot of attention and was reported in InfoWorld, ZDNet, CPA Practice Advisor and the Kiplinger Letter, among others.    How […]

By OPEX Engine | September 24, 2015

Bomgar is a venture-backed, mid-sized software vendor which has ranked in the Deloitte Technology Fast 500 for the past 4 years.

By OPEX Engine | September 10, 2015

The tagline for General Catalyst Partners is “entrepreneurs investing in entrepreneurs,” and partners of the active venture firm are well known for lending deep operating experience to their portfolio executives’ growing businesses.  I’ve known Larry for years since we were both operating executives at various software companies.  Here’s his take on the key operating metrics that […]

By OPEX Engine | September 9, 2015

Rally Software, based in Boulder, CO, is the leader in Agile Application Lifecycle Management (ALM) and IPO’ed April 2013.

By OPEX Engine | September 9, 2015

Financial results for the Class of 9 B2B SaaS companies that IPO’ed in 2014

By OPEX Engine | August 19, 2015

Even a 1% improvement in renewals can drive significantly higher valuations for a SaaS company over time

By OPEX Engine | July 17, 2015

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 […]

By OPEX Engine | May 22, 2015

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 […]

By OPEX Engine | May 5, 2015

OPEXEngine and the SIIA’s annual SaaS and Software benchmarking encompasses valuation models, sales and marketing operations, HR and employees, R&D, product and hosting, plus professional services (consulting) and customer service, launches April 7. The Software & Services Division (SSD) of the Software & Information Industry Association (SIIA), the principal association representing the software and digital content […]

By OPEX Engine | April 17, 2015

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 […]

By OPEX Engine | March 18, 2015

Learn about the Sales and Marketing efficiency Magic Number benchmark in the 2015 benchmarking.  Like the benchmarking of any key metric, you will drive operational efficiency and better use of your resources, when you see the variance between your company and your peers at the same stage and with a similar business model.  You can […]

By OPEX Engine | February 23, 2015

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. Planning and Budgeting Almost all of our clients use benchmarking to plan their […]

By OPEX Engine | January 28, 2015

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. Q: What are the do’s and don’ts in building a successful SaaS company? Lauren: SaaS is more complex and […]

By OPEX Engine | December 22, 2014

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.    OPEXEngine’s  Business Model Predictions for 2015 “Winner take all” competition for market […]

By OPEX Engine | December 15, 2014

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, […]

By OPEX Engine | November 25, 2014

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 […]

By OPEX Engine | November 12, 2014

Borrowing from the basics of Six Sigma, keep the following in mind as you define and manage your SAAS performance management and benchmarking: 1. Define the metrics All metrics should be clearly defined so that an organization can benchmark its success. One way to keep metrics understandable is to use the SMART (specific, measurable, achievable, […]

By OPEX Engine | October 27, 2014

The private U.S. software industry is experiencing its biggest revenue gains since the recession, and both private and public companies are renewing their focus on investment in order to gear up for further growth, according to a study announced today by the Software & Information Industry Association (SIIA), the principal trade association for the software […]

By OPEX Engine | July 18, 2014

Tracking performance metrics like monthly recurring revenues (MRR) and contracted monthly recurring revenues (CMRR), customer acquisition costs (CAC), renewal or churn rates, and customer lifetime value rate (CLV) is critical for driving growth at successful SaaS companies.  None of these metrics are GAAP metrics, though, and there is no auditing of the numbers.  Many companies […]

By OPEX Engine | May 21, 2014

Last week’s “Deciphering Finance” conference in Irvine, California, organized by the SIIA was a great forum for sharing best practices among Finance leaders and peer networking.   I thought one of the many useful sessions was the discussion between an experienced CEO and his CFO which captured some of the key issues in that relationship.  Here’s […]

By OPEX Engine | May 6, 2014

Security and performance investments, among other items, are driving up Cost of Revenue for SaaS growth companies. The ultimate goal of a subscription business model is to reduce the cost per subscriber and increase profitability. That does not mean, however, that cost ratios follow a smooth downward trend as revenues grow. 10 years after went […]

By OPEX Engine | April 8, 2014

order essay online Annual Study Finds SaaS Driving Largest Revenue Gains, and Indications of Growth Outside Silicon Valley, Massachusetts & Other Traditional Tech Centers. Small and mid-sized companies in the U.S. software industry are thriving in the post-recession economy, with software-as-a-service (SaaS) firms consistently experiencing the greatest revenue growth and hiring expectations, according to a study […]

By OPEX Engine | October 17, 2013

Imagine this scenario:  your company is relatively healthy and becoming established in the market but needs to keep up a fast growth pace or maybe even to grow faster.  Your heads of sales and marketing suggest that the best avenue to growth is that you need to add headcount in their respective departments.  Hard to […]

By OPEX Engine | July 8, 2013

Render unto Caesar … I recently met with a client CFO of a $100M software (not SaaS) company and in the course of our conversation she repeated a question her CEO had put to her recently: “Why do we pay so much in taxes; why can’t we pay something more like what GE pays?” It […]

By OPEX Engine | May 7, 2013

I recently spent two full days at a Retail Analytics and FP&A conference, which was terrific for many reasons. Retail FP&A (Financial Planning and Analysis) folks are very innovative in tying customer behavior to financial performance indicators. We in the software industry are true babes in the woods compared to retail companies on this one, […]

By OPEX Engine | March 17, 2013

Good news for sales and marketing executives defending their budgets if they are planning on going public soon: The total amount of money in the sales and marketing budget probably isn’t going to be questioned too much. That doesn’t mean that how they spend their money isn’t going to be questioned, or the effectiveness of […]

By OPEX Engine | March 5, 2013

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 […]

By OPEX Engine | February 24, 2013

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? In our annual Software and SaaS benchmarking, we’ve been tracking churn […]

By OPEX Engine | February 18, 2013

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: You may not have as good customer relationship […]

By OPEX Engine | April 23, 2012

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? […]

By OPEX Engine | March 25, 2012

get ex back 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 […]

By OPEX Engine | December 13, 2011

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 […]

By OPEX Engine | November 15, 2011

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 […]

By OPEX Engine | June 15, 2011



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