KPIs for SaaS Startups
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Slides used for Nick Franklin's presentation "KPIs for SaaS Startups" at SaaS Camp, Startup Camp Berlin - March 13th 2015 www.chartmogul.com
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KPIs for SaaS Startups
- 1. KPIs for SaaS Startups Nick Franklin SaaS Camp, Startup Camp Berlin - March 13th 2015
- 2. about me Nick Franklin Founder & CEO at Was early MD of EMEA then Asia nick@chartmogul.com@nick_franklin
- 3. Why Berlin?
- 4. High level SaaS KPIs* (*Key Performance Indicators) 1. The funnel Visitors Visitor-to-signup Signup-to-paying 2. Sales & revenue metrics 3. Support metrics
- 7. The funnel Search results, content, social Browsing site, creating trial On-boarded active trials Conversion Support/Success/CAM Up-sell & retention
- 8. Marketing & product’s KPIs Marketing’s KPIs Visitors Visitor-to-signup conversion rate Product’s KPIs Onboarding % TTV - Time to value App usage/Engagement
- 9. Inside sales ∙ Main indicator of success is the revenue metrics. ∙ They are a crucial part of the funnel and will raise the Trial-to-paid conversion rate. You should aim for 20%+ in the healthiest SaaS markets: ✓ USA + Canada ✓ UK ✓ Nordics ✓ ANZ The dream: Signup for a trial, if you like it put in your credit card details and buy The reality: This rarely happens over $500 MRR You call, email, call, email Lead > Prospect > Opportunity > Customer
- 10. Trial to paid ∙ Measuring trial-to-paid conversion rate. ∙ You should measure this in cohorts. e.g. 30-day, 45-day, 90-day trial to paid conversion rate. e.g. what % of trials created 45 days ago have now converted.
- 11. Sales and revenue KPIs ∙ Monthly Recurring Revenue (MRR) ∙ Annual Recurring Revenue (ARR) ∙ Customers ∙ Average Revenue Per Account (ARPA, ARPU, ARPC) ∙ MRR/Customer churn rate ∙ MRR/Customer growth rate (m-o-m, q-o-q) ∙ Customer Lifetime Value (LTV) ∙ Customer acquisition cost (CAC)
- 12. Monthly Recurring Revenue (MRR)
- 13. MRR Movements New business MRR Expansion MRR Contraction MRR Churn MRR Reactivation MRR
- 14. Churn-rate What is it? The rate at which you are losing customers or revenue through subscription cancellations. Calculation Segmentation is key to getting meaningful Churn metrics.
- 15. Churn Recognition Best practice is to recognise churn at the end of the paid up billing period.
- 16. Churn classification Pro-active churn Passive churn Happy churn Churn that isn’t really churn What is a reasonable level of Churn? ✓ Most SaaS companies selling to SMBs have quite high levels of monthly churn 3.2% customer churn. ✓ The more up-market you go the lower the churn rate (usually) ✓ Many public SaaS companies have negative net churn, as high as 20%
- 17. Most SaaS startups should aim for negative MRR churn http://christophjanz.blogspot.de/2015/02/why-most-saas-startups-should-aim-for.html Many of the best known public SaaS companies have negative churn, e.g. New Relic, Zendesk, but not a requirement to be a unicorn, e.g. HubSpot. Image credits to Tomasz Tunguz
- 18. Cohort analysis Cohort analysis is the best way to truly understand how your subscriptions evolve over their lifespan.
- 19. Financials Net revenue Revenue offset for refunds and discounts Cash burn How much cash you spend each month Cash balance Cash in the bank
- 20. Support KPIs ∙ Average 1st response time ∙ Average full resolution time ∙ Customer satisfaction score (CSAT) ∙ Net promotor score (NPS)
- 21. Where to learn more…or rather who to learn from Jason M. Lemkin @jasonlk saastr.com Christoph Janz @chrija theangelvc.net David Skok @BostonVC forentrepreneurs.com Tomasz Tunguz @ttunguz tomtunguz.com @ ChartMogul
- 22. SaaS Metrics Cheat Sheets Grab your printed copies at the front
Editor's Notes
- The main 3 things that I as a SaaS founder look at are 1,2,3 we spend all our time talking with saas companies. Culture KPIs - 15Five.
- This is the table we use to update our investors each month, so in this talk we’ll basically be going through these KPIs. This is actually part of a larger 2 page investor update template created by our investors. As you can see this covers the funnel and the sales and revenue metrics.
- So this is a kind of a traditional e-commerce style funnel (they use words like exposure, discovery, consideration, which no-one in SaaS uses).
- But in SaaS we basically do the same things. Optimising all parts of the funnel is kind of key to success. Right now we’re doing a great job at converting the on-boarded trials, but we need to get much better at converting visitors to trials.
- You can break the funnel down into 4 areas of responsibility - Marketing/Product/Sales/Success I was speaking with one of our customers recently and they have their visitor to signup conversion rate at 30%. Marketing is the top of the funnel - signups usually means trials in SaaS and these are the best types of leads - it can mean they attended a webinar or downloaded a white paper. Measuring the marketing KPIs you can use really basic stuff like Google Analaytics or more advanced stuff like mix panel. On-boarding is kind of a collaboration between marketing and product Intercom can help with app usage/engagement
- Inside sales usually kicks in once the user signs up for a trial (or webinar, white paper, etc) and their job is to basically convert the trial into a paying customer…on the highest (or right) plan for the customer. The dream - the vision that’s projected is of self service. Inside sales model - lead gets qualified.
- measure this in cohorts For the month of February, take all the trials that have their 30th, 45th, 90th day falling in February and see what % has converted into a paid customer. It just gives it more meaning - so you can say ok, our trial to paid conversion rate at day 30 is 15% but that shoots up to 25% by day 90.
- Monthly recurring revenue, subscription revenue normalised/amortized to 1 month- it’s the amount of revenue you would generate all customers are paying monthly and non cancel or upgrade or downgrade Early stage SaaS you shouldn’t really be spending a lot on customer acquisition, this one becomes important once you have product market fit and want to just grow as fast as possible in a financially sound way.
- Segmentation is key - filter out annual plans, and only run churn analysis on monthly plans.
- For the purpose of understanding user behavier
- this is actually the title of a blog post from a week ago by one of our investors - I’ve stuck the link at the bottom. But you can see on the left what happens when you have negative net churn of 5% vs positive net churn of 5% - basically over 12 months this translates to a nearly 80% differential.
- The best way to understand your churn and therefore reduce it is to use cohort analysis to see where churn is highest. The first time you see this it’s a little confusing - time is going in two directions, half the cells are empty, etc. We actually have a cohort analysis cheat sheet at the front you can pick one up later.
- It’s all about MRR but you still have to run your business as a business, and measuring your revenue, expenditure and balance is still important.
- 37 signals/basecamp got this down below 5 minutes last year. 1st response time - really important especially if they’re not paying - and they ask for support and then from your competitor and you answer 10x faster.
- + maybe lincoln murphy on the saas marketing metrics.
- one thing we’ve done that has been really popular is publish…