This is the version of Christoph's '9 Worst Practices in SaaS Metrics' as presented by Nicolas Wittenborn at Tech Chill Baltics on February 13, 2014.

1. 9!
Worst Practices
in SaaS Metrics
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ODA tenbo
T
Wit
olas
Nic
Christoph Janz!
Point Nine Capital

2. About me
Associate at Point Nine Capital!
I blog (too little) at heyni.co and tweet (too much) at @ncsh
We love SaaS!

3. A new member
!

4. 9
HORROR
worst practices
in SaaS Metrics

5. Image source:

6. Image source:

7. Image source:

8. worst practice
9
Confuse MRR with Cash Inflow
(or Bookings or Sales or Revenues)

9. MRR:
•
Monthly Recurring Revenue!
•
Shows how much revenue you make next month if you don‘t win
any new customers
(assuming no churn, no upgrades/downgrades, etc.)!
•
#1 SaaS metric. Much more important indicator than bookings or
cash inflow
(but cash inflow pays the bills!)
Example:
•
•
•
2 customers!
1 on a $20/m monthly plan!
1 on a $120/y yearly plan!
=> MRR = $30
ue!!
even !
ble r alue!
dicta e v
Pre fetim
ple!
ulti
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uatio
Val

10. worst practice
8
Underestimate churn
(by mixing up monthly with yearly plans)

11. Churn rate
# of customers who churned
# of customers who could have churned
Including customers who can‘t cancel in the
denominator screws up your churn estimate!
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12. worst practice
7
Ignore your cohorts

13. Retention over
user lifetime
Change in
retention over
product lifetime
Image source:
Cohort analyses are the only way to get a good
understanding of retention and customer lifetimes

14. worst practice
6
Don‘t track each step of the conversion
funnel

15. ttention
nterest
esire
ction

16. AARRR!v
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isit
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on
ion
n

17. Visitors
Free Trial Signups
Paying
Customers
Visitor-to-Trial
Conversion Rate
Trial-to-Paying!
Conversion Rate
Referrals
Retention Rate!
and Account Expansions

18. worst practice
5
Mix up visitors to your marketing
website with users of your software

19. 1800$
5,00%$
1600$
4,50%$
1400$
4,00%$
3,50%$
1200$
3,00%$
1000$
2,50%$
800$
2,00%$
600$
1,50%$
400$
1,00%$
200$
0,50%$
0$
0,00%$
1$
2$
Visits$
3$
4$
Signups$
5$
Signup$Rate$
6$

20. 1600$
6,00%$
1400$
5,00%$
1200$
4,00%$
1000$
800$
3,00%$
600$
2,00%$
400$
1,00%$
200$
0$
0,00%$
1$
2$
Signups$
3$
4$
Website$visits$
5$
6$
Signup$Rate$

21. worst practice
4
Show CACs on a blended basis only
(mixing up paid and non-paid sources of leads)

22. Example:
•
•
100 customers @ $0 per customer!
20 customers @ $500 per customer
average CACs of $83.33, but !
the average is pretty meaningless

23. Catch the low-hanging fruits, just don‘t
expect them to scale!

24. worst practice
3
Attribute all conversions to
your sales team

26. Find out how well your signups are converting
without being called by a salesperson. !
!
A/B test and calculate the ROI on your sales
investments based on the conversion uplift.
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27. worst practice
2
Assume you‘re growing exponentially

28. •
True exponential growth is very, very rare in SaaS – requires virality
which most SaaS products don‘t have!
•
Most SaaS companies grow linearly and with step changes!
•
Even a modest exponential growth rate of 10% p.m. is very hard to
sustain for a longer period of time
Reading exponential growth into linear growth
numbers can lead to wrong conclusions
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29. worst practice
1
Don‘t start tracking KPIs until investors
request it

31. Because...
•
Many metrics are actionable – they tell you what to focus on, when
to invest in acceleration, etc.!
•
Metrics help you focus your team on what matters most!
•
Investors want historic numbers, not just a snapshot

32. Thank you.
!
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Questions?!
O nt
poi
las@
christoph@pointninecap.com
nico