This presentation is all about growing your top-line revenue by leveraging Customer Success Management metrics. The most successful Enterprise SaaS companies know that growing revenue only through new customer acquisition is the less efficient way to scale. Rather, they understand that growing revenue within your existing customer base - through up-sells, cross-sells, and expanded use - is the most profitable way to scale. In fact, Enterprise SaaS companies that grow revenue - and company valuation - by expanding revenue within their existing customer base also know the key to making this work is to focus on - and operationalize - Customer Success.

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Drive Growth
Customer Success
Metrics
May
2014

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Housekeeping
• Q&A panel on your right
• Recording for colleagues who can’t make it
• All attendees will receive slides
• Twitter hashtag #customersuccess

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Today’s Panelists
Lauren Kelley
CEO & Founder
@opexengine
Allison Pickens
Director of Business Operations & Finance
@pickensallison

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What We’ll Cover
1. OPEXEngine Benchmarking 2014
2. Customer Success Metrics
3. Tying CSM Metrics to Financial Growth
4. Q&A

5. Management by Metrics
The Smarter Way to Manage Your
Software Company
Lauren Kelley
www.opexengine.com

6. About
Trusted Financial Benchmarks for the Tech Industries
 8th year helping small and medium-sized software, SaaS, Internet and other tech
companies manage and plan for growth
 Partnered with Netsuite, Intacct, Adaptive Planning, Oracle and the Software and
Information Industry Association (SIIA)
 Proprietary survey data from hundreds of private and public software companies
since 2006
 Partnered with EDGR/RR Donnelly to deliver on-demand Financial Insights Reports,
on-demand comparison reports based on real-time database of over 16,000
companies
6
www.opexengine.com
“We found OPEXEngine’s reports to be square on with what we needed and a critical source of data for our management team.
High quality data – like OPEXEngine – is rare and worth paying for.” Jim Lejeal, CFO, Rally Software

7. Confidential and Comprehensive
Benchmarking
www.opexengine.com
“We’ve participated in OPEXEngine’s confidential software benchmarking for the past
four years and find the data highly useful. As a fast growth, mid-sized, public software
company, we are data-driven in our management and planning processes and
OPEXEngine’s software benchmarking is a critical information source for detailed
financial and operating metrics.” Ralph Bryant, VP Finance, RightNow/Oracle
“The OPEXEngine benchmarking report is a key element of our planning process, it
helps us set the right targets for our cost structure 2 to 3 years out.” Stephane Panier,
CFO, GoodData
Private CompaniesAll Participating Companies
7

8. Key Factors
 Early stage, private or later stage public
 Are you Salesforce.com or a $10M venture backed company?
 Goals: Growth vs. Profitability?
 Sales and marketing model: do you sell larger contracts to enterprise type customers, or small subscriptions to
SMEs?
Peer Analysis
Who do you compare yourself with?
“The great thing about the OPEXEngine data is that there are several peer groups to look at. You can look at metrics for private vs.
public companies, metrics for companies in your revenue band, or with similar headcount. So many other metric reports are too
focused on public companies. Public company data just isn’t that relevant to us.” Mike Morgan, CFO, Bomgar Corporation
“At T2 Systems, we migrated our customers to the SAAS business model in 2005. Since then, we struggled to find key benchmark
data that we could use to determine the quality of the Company’s financial metrics. OPEX Engine easily filled that void for our team
by providing us with key data points ranging from customer acquisition costs to revenue per employee. OPEX is one of our
strategic planning tools.” Jim Zaloudek, CFO, T2 Systems, Inc.
8
www.opexengine.com

9. Best Practices
Benchmarks drive performance and accountability
 Save time making data-driven decisions
 Bring your performance targets in line with market leaders and grow faster
 Reduce expense in line with peer group norms
 Have better conversations with line management with neutral, 3rd party benchmarks
 Track model changes by peer companies and competitors
“As CFO at two different successful companies, we participated regularly in the OPEXEngine Software and SaaS
benchmarking and got terrific value in the process. OPEXEngine benchmarks all the key business metrics we
needed and is unique because you can’t find this kind of information for private companies anywhere else.
Participating in the benchmarking process was straightforward and a useful exercise for my team.
The benchmarking allowed me to support and collaborate with the CEO and other exec team members, plus the
board, in a way that I couldn’t have done without the benchmarks. With the OPEXEngine benchmarks, I had
better and more productive conversations with line management. OPEXEngine does something that you can’t
find anywhere else, since the data comes from the participants directly, and OPEXEngine works with each
company to ensure the data is clean and comparable.” Dan Kossmann, former CFO Initiate Systems (bought by
IBM) and Outstart (bought by Kenexa)
9
www.opexengine.com

10. SaaS versus Traditional License Model
Differences
• Less visibility • More predictive
• Sales predicts revenue; sales-driven P&L • Finance predicts revenue; model-driven P&L
• Fewer moving parts, fast moving levers • More moving parts, slow building business
• Value of customer relationship drops off
after 1st sale
• Maintaining customer relationship is key:
renewals and upselling
• Customer choses and pays for all IT to run
the software
• Vendor runs and maintains all software and
hardware to deliver SaaS offering
• Contracts structured for revenue recognition • Contract drives the process, cost, and customer
interactions
Software-as-a-ServiceTraditional Software

11. SaaS – A Metrics Driven Model
Revenue Metrics:
• CMRR
• Net new CMRR
Customer Metrics:
• Total # and net new subscribers
• Contract value per customer
• Customer lifetime value (CLV)
• Customer acquisition cost (CAC or COCA)
• Monthly gross margin per customer
• # months to break even
• Omniture’s Magic Number for putting on gas
in sales and marketing
Churn/Renewal Rates:
• Customer Renewal Rate
• Dollar Renewal Rate
Cost of Revenue
• Cost of Goods
• Cost of Services
Hosting Expense
• Third party
• In-house
Virtually none of these indicators were tracked 10 years ago
www.opexengine.com

12. Definitions: The Devil’s in the Details
 MRR
 CMRR
 Cost of Customer Acquisition
 Renewal versus Retention
 Customer Churn
 (Net?) Dollar Churn
Most key metrics are not GaaP metrics – there’s no accountability for how
you define them. Adapt them to your business, but be cautious when
understanding other company’s data.

13. SaaS Renewal Rates
Keep customers satisfied, avoid churn and begin up-selling
13
2013 OPEXENGINE OPERATING BENCHMARKS FOR
SOFTWARE AND SAAS VENDORS PRIVATE SAAS
HYBRID PUBLIC
COMPANIES PUBLIC SAAS
Average Recognized Revenue $21,246,957 $264,813,000 $219,433,211
Churn Rates
Customer Renewal Rate During Year (as a % of
Customers Up for Renewal) 86.0% 97.2% 95.0%
Dollar Renewal Rate During Year (as a % of Total $
Value Up for Renewal) 93.5% 97.7% 98.0%
Source: OPEXEngine Benchmarking, 2013 All Rights Reserved
www.opexengine.com

14. Early-to-Later Stage Private SaaS
Reaching profitability earlier, then kicking into high gear growth mode
www.opexengine.com 14
2013 OPEXEngine Software and SaaS
Confidential Benchmarking
All Private
Companies
Saas: Less Than $10
Million
Saas: $10 Million - $20
Million
Saas: More Than $20
Million
PRIVATE COMPANIES
Average Recognized Revenue $24,738,701 $6,263,747 $15,003,561 $40,808,762
2012 over 2011 YTY Revenue Growth
Rate 30.50% 30.50% 14.80% 58.00%
Total Expenses 122.90% 141.10% 115.40% 123.00%
Dollar amount of investment capital
taken over company's life $27,500,000 $4,800,000 $10,450,423 $58,500,000
Source: OPEXEngine Benchmarking, 2013 All Rights Reserved

15. Revenue Growth Rates at IPO
www.opexengine.com 15
Source: OPEXEngine On-Demand Financial Insights Reports,
All Rights Reserved

16. Market Valuation and Revenue Growth
Alignment
www.opexengine.com 16
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
Revenue to Market Cap Multiplier Annual Revenue Growth
Source: OPEXEngine On-Demand Financial Insights
Reports, full year 2013

17. 2013 Public SaaS Sales & Marketing
Expense to Revenue Growth
Source: OPEXEngine On-Demand
Financial Insights Reports, 2013
17www.opexengine.com
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
Annual Revenue Growth S&M Expense as a % of Recognized Revenue

18. Operational Trends for 2014
 Advanced Customer Success
Management
 Security
 Performance and redundancy
 Expansion into international markets
 Return of the channel
www.opexengine.com 18

19. Software and SaaS Benchmarking 2014
Extended deadline for registered Gainsight webinar participants – thru
May 15 ONLY
19
www.opexengine.com

20. Find out more about growth benchmarking:
www.opexengine.com
Business, like sports, is about
constantly benchmarking your
performance and using that data to
improve.
20
www.opexengine.com

21. lauren@opexengine.com
617-674-4218
www.opexengine.com
www.opexengine.com 21

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DRIVING FINANCIAL SUCCESS
WITH CUSTOMER SUCCESS
METRICS

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What Friction?

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How Do We Steer?

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Time for an Upgrade

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1. Batting Average
# Customers Renewed In
Period
÷
# Customers Renewable In
Period
Are customers
voting with their
signature on the
value of your
product or
service?
Best-in-class:
> 90%

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2. Net Revenue
Retention
Beginning of period ARR/MRR
+ ARR/MRR from tailwind –
ARR/MRR from headwind
÷
Beginning of period ARR/MRR
What’s the net
dollar impact
from Customer
Success?
Best-in-class:
> 120%

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3. Headwind
ARR/MRR of churn dollars
including price decreases
and downgrades
÷
Beginning of period
ARR/MRR
How much drag
do you have on
your growth?
Best-in-class:
< 10%

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4. Tailwind
ARR/MRR of up-sell dollars
including price increases
and upgrades
÷
Beginning of period
ARR/MRR
How much
acceleration do
you have to new
bookings?
Best-in-class:
> 20%

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5. Magic Number
ARR/MRR of renewals in
period + ARR/MRR of up-
sells in period
÷
Fully-loaded cost of
Customer Success team +
extended team
What’s the cost-
effectiveness of
Customer
Success?
Best-in-class:
3-5X or higher

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We’ve Got CSM Metrics
Now what?

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MAKE IT ACTIONABLE WITH
CUSTOMER SUCCESS WORKFLOW

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How we use Gainsight
• Reduce churn
• Drive growth
• Manage your team
• Get proactive

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Stay on Top of Churn

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Explore Data to Identify Root Causes

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Intervene Just in Time
Alert/Manage Risk

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How we use Gainsight
• Reduce churn
• Drive growth
• Manage your team
• Get proactive

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Forecast and Plan Growth

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Drill Through to Take Action

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Get a Complete Customer Picture

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How we use Gainsight
• Reduce churn
• Drive growth
• Manage your team
• Get proactive

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Manage Your Team

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How we use Gainsight
• Reduce churn
• Drive growth
• Manage your team
• Get proactive

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Keep Customers in the Green

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Start Being Proactive
Predict risk and opportunity with data science

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File-sharing Co.
• AMs used to handle 50
accts max
• Load-balanced 3000
accounts based on
anticipated alerts
• Kept the team small and
lean: 100 accts/AM for
$3M savings/year

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QUESTIONS?PULSE.GAINSIGHT.COM

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