tues1200 metrics value-veltinkschaik-saasenergy
DESCRIPTION
TRANSCRIPT
SaaS Value Drivers & Metrics Jos van Schaik & Frits Vel4nk
Opportuni4es?
The SaaS Value Proposi4on
WHY INVESTORS ARE INTERESTED
The Value Components of SaaS
Maximize Customer Value
Cost Efficiency
High and scalable Revenue Growth
CFO QUESTIONS
10/10/12
10/10/12
A Business Example Company “BZN”
THE SALES CASE: WE HAVE DONE GREAT! LET’S INVEST MORE IN SALES
10/10/12
IN EUR'000 Q1 Q2 VARIANCE BUDGET VARIANCE
REVENUES 1.350 1.854 37% 1.685 10%
BOOKINGS 1.600 3.130 96% 2.087 50%
SALES & MARKETING COST 450 570 27% 500 14%
BOOKINGS?
10/10/12
IN EUR'000 BOOKINGS
BIG 5 YEAR DEAL 1.780 TWO NEW 3 YEAR DEALS 576 SEVEN RENEWALS 672
UPSELLING ON 3 RENEWALS 102
TOTAL 3.130
CFO: BOOKINGS RECURRING (ARR)
10/10/12
IN EUR'000 BOOKINGS 1 OFF ARR
BIG 5 YEAR DEAL 1.780 1360 84 TWO NEW 3 YEAR DEALS 576 192
SEVEN RENEWALS 672 -‐
DISCOUNT ON RENEWALS -‐168 UPSELLING ON 3 RENEWALS 102 102
CLOSING Q2 3.130 1.360 210
CHURN: DID WE LOOSE ANY?
10/10/12
CUSTOMER RENEWAL REPORT Q2 2012
# ANNUAL REVENUES '000 DISCOUNTS '000 UPSELLING '000 TOTAL ANNUAL REVENUES
CUSTOMERS UP FOR RENEWAL -‐15 -‐2.040 -‐2.040
CUSTOMERS RENEWED 7 840 -‐168 102 774
CUSTOMERS LOST -‐8 -‐1.200 -‐168 102 -‐1.266
CUSTOMER SUPPORT EXPECTS TO LOOSE ANOTHER 16 CUSTOMERS IN Q3 AND Q4!
THE CASE BASED ON SAAS METRICS: WE HAVE DONE TERRIBLE!
10/10/12
IN EUR'000 BOOKINGS 1 OFF ARR CUSTOMERS AVG ARR
OPENING Q1 6.000 50 120BIG 5 YEAR DEAL 1.780 1360 84 1TWO NEW 3 YEAR DEALS 576 192 2
SEVEN RENEWALS 672 -‐ 0
DISCOUNT ON RENEWALS -‐168 0UPSELLING ON 3 RENEWALS 102 102 0
CHURN -‐1.200 -‐8
CLOSING Q2 3.130 1.360 5.010 45 111
IT GETS WORSE…. CHURN CONTINUES AND COMPETITION BENEFITS
10/10/12
IN EUR'000 ARR CUSTOMERS AVG ARR
CLOSING Q2 5.010 45 111
EXPECTED Q3 (NET) -‐720 -‐6
EXPECTED Q4 (NET) -‐720 -‐6
CLOSING Q4 3.570 33 108
WE ARE LOOSING MONEY! BANKRUPT IF WE CONTINUE THIS WAY!
10/10/12
-‐
500
1.000
1.500
2.000
2.500
3.000
Q1 Q2 Q3 Q4
Recurring Con
tribu
tion/Acqu
isitio
n Co
st
Time
Recurring Contribution
Annualized CAC
TIME FOR DRAMATIC CHANGE
• RECURRING REVENUES DROP • RECURRING CONTRIBUTION PER CUSTOMER DROPS (ARR DROP PLUS ACS NOT 100% FLEXIBLE)
• SALES IS INEFFECTIVE AND WAY TOO EXPENSIVE!
10/10/12
MINIMIZE SALES COST AND FIX ORGANIZATION FIRST
10/10/12
SOME THEORY
-‐
100.000
200.000
300.000
400.000
500.000
600.000
1 2 3 4 5 6 7 8 9 10
Recurring Co
ntrib
ution/Acqu
isitio
n Co
st
Time
Achieving SaaS Profitability; No Churn
Recurring Contribution
Customer Acquisition Cost
SaaS Profitability; Breakeven when Customer Acquisi4on Cost = Recurring Contribu4on
10/10/12
-‐
100.000
200.000
300.000
400.000
500.000
600.000
1 2 3 4 5 6 7 8 9 10
Recurring Con
tribu
tion/Acqu
isitio
n Co
st
Time
Achieving SaaS Profitability; 25% and 35% Churn
Recurring Contribution 25%
Recurring Contribution 35%
Recurring Contribution
Customer Acquisition Cost
SaaS Profitability; Churn pushes out the Time to Profit
Time to Profit
10/10/12
Time to Profit
-‐
200.000
400.000
600.000
800.000
1.000.000
1.200.000
1.400.000
1.600.000
1 2 3 4 5 6 7 8 9 10
Recurring Con
tribu
tion/Acqu
isitio
n Co
st
Time
Achieving SaaS Profitability; 20% growth of acquisition rate
CAC = 2000
CAC = 2750
Recurring Contribution
CAC = 1250
SaaS Profitability; Growth pushes out the Time to Profit
10/10/12
Time to Profit
CONTROL YOUR CAC!
SaaS Profitability; Customer Value: effec4ve upselling improves the Time to Profit
10/10/12
-‐
200.000
400.000
600.000
800.000
1.000.000
1.200.000
1.400.000
1.600.000
1.800.000
1 2 3 4 5 6 7 8 9 10
Recurring Co
ntrib
ution
/Acquis
ition Co
st
Time
Achieving SaaS Profitability; 20% growth of acquisition rate; 15% Upsell @ no extra cost
CAC = 2000
CAC = 2750
Recurring Contribution
RC including 15% Upsell
Time to Profit
Managing the Cost of Acquisi4on: Customer Acquisi4on Cost Ra4o
10/10/12
ARR -‐/-‐ ACS
CAC
• ARR = Annual Recurring Revenues per customer • ACS = Annual Customer Service Cost per customer • CAC = Customer Acquisi4on Cost per customer
< 0.5
0.5 > = < 1
> 1
Stop invesLng and look at your business
ConLnue to invest in Growth
ACCELERATE!
10/10/12
(210 -‐/-‐ 105)
570
• ARR = Annual Recurring Revenues per customer • ACS = Annual Customer Service Cost per customer • CAC = Customer Acquisi4on Cost per customer
0,18 < 0.5
0.5 > = < 1
> 1
Stop invesLng and look at your business
ConLnue to invest in Growth
ACCELERATE!
OUR CAC RATIO IS 0,18 IN Q2!
FIX THE CACR! WHAT CAN WE DO?
10/10/12
ARR -‐/-‐ ACS
CAC
• ARR = Annual Recurring Revenues per customer • ACS = Annual Customer Service Cost per customer • CAC = Customer Acquisi4on Cost per customer
> 0.5
Upselling
Lower Cost of Services
Minim
ize Churn
Lower CAC
Control the Growth and watch the cash flow!
10/10/12
What do SaaS providers say!
Research Methodology
Totango surveyed 134 executives at SaaS companies about the key performance indicators used to run their businesses. The same survey was also conducted in 2011 giving Totango unique insights into SaaS trends.
61%
68%
2011 2012
68% of SaaS Executives are unhappy with the current metrics and methods available to measure SaaS business progress, which is up from 61% from last year.
1
57%
57% of SaaS Executives are planning to implement new Key Performance Indicators to better measure and manage their business in the next twelve months.
2
There is a shift towards customer centric measurements, designed to report on the success of existing customers: 5 out of the top 6 new Key Performance Indicators are customer metrics.
3
5%
8%
9%
13%
16%
39%
NPS
Upsell
Campaign performance
CLV
Churn
Product Usage Analysis
OVERVIEW AND SUMMARY
10/10/12
10 October 2012
What is your current business?
Volume
Complexity & Price ( CAC & TCS)
1
2 3
10 October 2012
What is your future SaaS en Cloud business?
Volume
Complexity & Price ( CAC & TCS)
1
2 3
Who do you want to be ?
Distributors
Start-‐ups
CSP’s
SW-‐Resellers
HW-‐Resellers
System Integrators
ISV’s
Direct Response Centers
Enterprises
Hosters/MSP’s
Solu4ons Providers
“I want to help my clients to design,
build, manage their private cloud”
I want to build and operate a public
cloud infrastructure (IaaS and PaaS)”
“I want to deliver my application / asset as a cloud
service”
“I want to extend and value to other providers’ clouds”
“I want to resell a portfolio of public cloud services”
“I want to aggregate a
portfolio of public cloud services for
my clients ”
KEY VALUE DRIVERS & METRICS for SAAS PROFITABILITY
• Customer Related (CACR) – Recurring Contribu4on (Recurring Revenues -‐/-‐ Recurring Cost of Services) – Growth – Reten4on Rate (nega4ve = Churn) – Cost of Acquisi4on
• Opera4onal Service Cost Related (ACS) – Recurring Cost of Running a Service including Cost of Infrastructure – Speed (and cost) of Deployment
• CASH – Cash Posi4on on short, mid and long term – Monthly Recurring Revenues – Monthly Recurring Expenses
• ALL RELATED IN MANAGING THE SAAS BUSINESS MODEL
10/10/12
Demonstrate the value of the SaaS model to the stakeholders!
• Clear Posi4oning and Strategy • Value Drivers + KPI’s in a consistent and integrated Business Model – Effec4ve repor4ng of KPI’s monitoring and managing the model
• Financing need clear
10/10/12
THE PATH TO A MANAGABLE AND EFFECTIVE SAAS REPORTING SYSTEM
• PAINT THE LANDSCAPE AND LOOK AHEAD – What business am I in and where are we going – What informa4on/ metrics are currently used to manage the business – Which metrics would bring value in the future and priori4ze – Are data available/accessible to feed metrics
• ORGANIZATIONAL READINESS/URGENCY – Available competencies – Change management – Educa4onal acceptance
• Evaluate – Involve key personal across organiza4on
• Get feedback • Create buy in
• Take an agile approach – Define approach, Get started, Automate, Prac4ce what you preach, Adapt and op4mize
• Communica)e with all stakeholders involved 10/10/12
And You will be
10/10/12
BENCHMARKS
10/10/12
10/10/12
10/10/12
10/10/12