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

SaaS FP&A  

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.  I’ve been a business partner of Finance and the CFO in several public companies in past lives, and SaaS Finance today is a more demanding operation than Finance was in traditional software companies.

SaaS Finance Benchmarks

SaaS companies tend to have more Finance headcount than traditional, non-Cloud companies.   And faster growth companies have more Finance people than slower growth SaaS companies.  The metrics that drive SaaS are not GAAP metrics and companies need a strong Finance department to be the one source of truth about the financial AND the operating metrics.

Median Finance headcount in private, growth SaaS companies averaging $25M is 7 Finance executives.  When you filter the same group of companies but adding revenue growth over 50%, the median number of Finance execs rises over 70% to 12 in Finance.  The benchmark for a broad range of public SaaS companies averaging $200M revenues is 18 in Finance, but when you add a filter to the same group of companies to segment by companies with over 50% revenue growth, the median in Finance more than doubles to 41 people.

Finance skill sets

From speaking with a variety of CFOs and VPs of Finance recently, here’s what we are hearing they are looking for in their FP&A hiring, outside of traditional Finance, math, accounting and reporting skills.

Skills & Experience

  • Stronger technical skills – SQL, Python, and statistical analysis
  • Ability to accurately benchmark key metrics against peers and market leaders
  • Excellent communications skills, both written and verbal
  • Cross-functional experience – helpful to have worked in SalesOps, Business Development or Strategy but have the Finance experience as well
  • People who are comfortable with change and dynamic work environment
  • Curious, problem solvers who can think out of the box

We are meeting more and more SaaS FP&A executives with an undergraduate computer science degree, and graduate business or Finance degree.  We’ve also seen a portion of SaaS FP&A executives coming out of investment banking or investor groups.  In addition, we see many Finance executives who are very articulate about a company’s business model, its products and understand the sales process at a much more granular level than previously.

Recently, I was waiting to meet with a CFO of one of our participating benchmarking companies whose board meeting was running longer than expected.  When he came out, the first thing he asked me was, how do you define a Sales Qualified Lead (SQL)?  Clearly, the Board had been discussing conversion rates and the Marketing/Sales funnel.  He actually wanted to know the specific criteria for defining a SQL (Budget, Decision-making Authority, Need, Timeframe).  I guarantee that in my past lives, none of the CFOs that I worked with had any idea of what qualified as a SQL nor felt that it was part of their job to understand it.

More and more CFOs are coming from FP&A and not coming up the traditional accounting route.  And more and more CEOs are coming up from the Finance track, as compared to 20 years ago when CEOs typically came up through Sales, or if a technical founder, having been a CTO previously.

Winners and losers in the SaaS world are increasingly defined by the strength of a company’s Finance department.  When Finance is involved in company strategy and can provide a metrics-based framework for company management to analyze growth initiatives and resource efficiency in each department, companies grow faster and more profitably.  SaaS success is increasingly defined by the business model and the balance between revenue growth and profitability.  SaaS Finance teams that utilize peer benchmarks are actively involved in helping company management both set its targets and achieve them, not just reporting on past performance.

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