SaaS Bootcamp

Sales & Marketing Metrics Harry Largey

CEO, CloudMover

3rd February 2016

Todays’ Agenda 9:30am Designing Sales and Marketing Processes

Aligning to the Customer Purchase Journey

11:00am Break

11:15am Building the Sales and Marketing Components

12:30am Lunch

1:30pm Building Funnels

3:00pm Break

3:15pm Allocating Resources

Understanding CAC and LTV

4:30pm Close

Machine Elements

Part 1

Designing Sales & Marketing Processes

Simple Selling

Sales Stage Prospect Qualify Develop Solution Proof Close Won

Objective Validate opportunity. Identify sponsor.

Generate interest and qualify intent.

Develop requirements. Build relationships.

Solution proposed.

Solution agreed. Conduct negotiations and finalise contracts.

Sign and celebrate.

Probability 0% 10% 20% 40% 60% 80% 100%

Checkpoints Opportunity meets sales criteria to proceed.

Pain admitted by Sponsor. Compelling event identified.

Evaluation plan proposed.

Evaluation underway.

Evaluation complete, expectations exceeded.

Verbal yes received. Draft contracts exchanged.

Final documents signed.

Tasks Completed Before Progressing

Perform pre call research. Generate interest with sponsor.

Access to power. Competitive assessment.

M-A-N confirmed. Exec meeting scheduled. Criteria set for trial/evaluation.

Budgetary approval. Exec meeting completed. Purchasing process defined

Internal review complete. Customer review complete. Deployment plan agreed.

Finalise all deliverables and milestones.

Hand over to Ops. Begin upsell. Agree reference capability.

Marketing Stages

MARKET POSITIONING, DEFINITION AND SIZE AWARENESS INTEREST EVALUATION (MQL)

M0 M1 M2 M3

Market Research, Positioning and Messaging Campaigns in Market Engagement Marketing Leads Generated

Market research - clients, prospects, staff and influencers Campaign materials in place Correlation of uptake Qualification of marketing leads

Comms platform and key messaging Engagement process underway Learning - minor iterations Select those meeting sales profile

Sweet spot prospect profile/target audience Uptake being tracked Follow up processes Follow up with non core prospects

Target market sized Heads up to Sales for handover

Initial database build Review, learn/tweak

External value proposition agreed

First level of competition identified

Pricing agreed

Intital materials prepared

Campaign success metrics agreed

Comms Platform and Messaging Sign off People engaged List of people engaged committing time List of MQLs to hand to Sales Process

Campaign Approved /Resourced

TO GET INTO THIS STAGE

ACTIVITIES

VERIFIABLE OUTCOMES

Sales Stages

Part 2

Aligning to the Customer Purchase Journey

Building Components

Who is the customer?

The person who gives you money

The user of the service

The influencer of the decision

The partner involved in supply or enablement

What does a customer discovery to success journey look like?

As an example

Mode Customer

Discovery Reads a blog

Gets a direct Mailing

Lands on website

Watches video

Sales Signs up for trial

Converts to paid

Success Renews contract

Refers a friend

Part 3

Building Funnels

Your Sales and Marketing Funnel

Funnel Metrics Funnel

Segment Looks like…. Number Ratio

Forecast Cost Per

Progression

AWARENESS Landing on website 1,000 -

INTEREST Multiple clicks / time spent

200 20%

EVALUATION Download, trial, registration

50 25%

COMMITMENT Purchase Intent 10 20%

PURCHASE Purchase Complete 3 33%

RETENTION Minimise churn 2 66%

Part 4

Allocating Resources

Cost of Customer Acquisition (CAC/CCA)

& Customer Life Time Value (LTV)

How do I engage the customer?

Field Sales Tele Sales

Classic

Marketing

Digital Marketing

What assets to deploy

Mode Customer

Discovery Reads a blog

Gets a direct Mailing

Lands on website

Watches video

Sales Signs up for trial

Converts to paid

Success Renews contract

Refers a friend

Resources Required

Content Marketing

Mail System

Responsive Website

Embedded Video

Provisioning System

Telesales

Telesales

Viral Enablement

So what should your org look like?

Cost and reward models

• How much do the assets cost?

• What behaviours do you want to encourage?

• What results do you need?

• The optimal cash mix?

Macro Level Metrics

The 6 Cs of Cloud Finance +2 1. Committed Monthly Recurring Revenue (CMRR)

2. Cash Flow

3. CMRR Pipeline (Cpipe)

4. Churn

5. Customer Acquisition Cost (CAC)

6. Customer Life Time Value (CLTV)

… and 7. TCV & ACV

… and 8. GAAP Compliance

Excerpt from: Bessemer’s Top 10 Laws of Cloud Computing and SaaS

Running an on-demand company means abandoning many of the long-held tenets of software best practices and adhering to these new principles.

By: Philippe Botteri, David Cowan, Byron Deeter, Adam Fisher, Devesh Garg, Bob Goodman, Jeremy Levine, Gary Messiana, Anil Sarin, and Sarah Tavel

CMRR (Committed Monthly Recurring Revenue)

From bookings and opacity…

EXPENSES

BOOKINGS

Difficult to make decisions:

– Multi-year bookings

– Non-recurring revenues

– Impact of churn and

renewal?

… to CMRR and transparency!

Full transparency :

– Employee assessment

– Operational planning

– Financing

– Valuation

CMRR

New Accounts

Upsell & Expansion less

churn

Existing Contracts

Renewals

EXPENSES

Cash

burn

rate

Cash is King!

Lines are still not crossing!

Expected breakeven point

Heavy upfront financing… … requiring tight expense management

Key drivers of cash consumption: Customer

Acquisition Costs, Churn, Renewal rate

Monthly recurring expenses

Monthly Recurring Revenue

Complex ERP sales

Freemium model

Cash: Give the right incentives to your sales force to get longer upfront payment

Quarterly Annual Semi-Annual

Payment terms mix impact on Cash Flow

Additional $38m burn

Additional $52m burn

5-year cash impact* • Changes in payment mix

can have a drastic impact on cash flows

• Sales incentive needs to be heavily biased towards annual upfront cash payment in the high growth phase

Company starting with $1m CMRR and growing at 60% CAGR

Churn defines the viability of your business model

Benchmark

• MRR churn (<12% p.a. and < Upsell)

• Customer Churn

Effect of 20 % churn on MRR base

Addressing Churn

Root causes

– Pricing/ Value

– UI and workflow complexity

– Downtime

Monitoring

– Overall application usage (login frequency

and time)

– Application usage (most frequent use

case, function used…)

Acting

– Competitive analysis/sales tools

– Usage monitoring (e.g., True Login

Percentage, API usage) and follow-up

– GUI/ workflow redesign

– Platform stability

– Increased discount for early payment

100

80

64

51

Start of

year 1

End of

Year 1

End of

Year 2

End of

Year 3

50% MRR loss

in 3 years

Churn

Excerpt from: Joel York – Chaotic Flow

Upselling

Excerpt from: Joel York – Chaotic Flow

Cost of Acquiring a Customer (CAC)

Exercise E

At your table, model out a CAC example

Present back to group

Cost per Stage Progression (CSP) RESOURCE COSTS PER STAGE Hours Used Cost per hour Resource Cost

Telesales resource 22.00 15.00€ 330.00€

Field sales resource 5.00 50.00€ 250.00€

Digital marketing resource 24.00 18.00€ 432.00€

Offline marketing resource 7.00 22.00€ 154.00€

Other resource 8.00 12.00€ 96.00€

Total 66.00 1,262.00€

MARKETING COSTS PER STAGE Units Used Cost per unit Marketing Cost

SEO & SEM 2 5,000.00€ 10,000.00€

E-Content marketing 4 500.00€ 2,000.00€

Google 2000 2.25€ 4,500.00€

Total 16,500.00€

PROGRESSIONS

Number of progressions by campaign 45

COST CALCULATIONS

Resource Costs 1,262.00€

Marketing Costs 16,500.00€

Total 17,762.00€

UNIT COST PER STAGE PROGRESSION

Total cost to progress one unit 394.71€

Customer Lifetime Value (CLTV)

Revenue & Churn Customer 1 Customer 2 Customer 3

Year 1 Revenue 1,000.00€ 500.00€ 2,500.00€

Retention Rate 75% 65% 95%

Upsell 10% 25% 0%

Year 2 Revenue 825.00€ 406.25€ 2,375.00€

Retention Rate 70% 70% 90%

Upsell 10% 20% 10%

Year 3 Revenue 635.25€ 341.25€ 2,351.25€

Retention Rate 50% 90% 90%

Upsell 20% 10% 20%

Year 4 Revenue 381.15€ 337.84€ 2,539.35€

Retention Rate 50% 80% 80%

Upsell 20% 40% 40%

CUSTOMER LIFETIME VALUE 2,841.40€ 1,585.34€ 9,765.60€

The Cloud Dashboard

CMRR

6C’s Measurement

• Growth rate

• Upsell vs. new customers

Target

• 50%+

• Upsells >= churn

Cash • FCF

• Payment terms

• Pro. Serv. GM

• breakeven @ 50% growth

• 1-year upfront mix > 50%

• >0 on project basis

Churn • Churn rate • Churn < 12%

CAC • CAC ratio (new CMRR)

• CMRR renewal cost

• CAC > 1

• < 30% of annualized GM

CLTV • CLTV

• G&A as % of sales

• R&D as % of sales

• CLTV>CAC

• G&A ~15% at scale

• R&D ~10% at scale

Free Cash Flow at scale: 20%+!

CPIPE • > Factored x3 Target

• > x5 OTE per Rep

• Reducing

• Multiple of ACV Target

• Rep Productivity

• Time in stage

Some more metrics

• New Bookings

• Projected Bookings

• New Customer Count

• Renewal Rates

• Class Of Analysis

• Renewal Rate by Segment

• Renewal Bookings Projections

• Upgrade & Up Sell Performance

• Cancellation Projections

• Cancellation Counts

• Total Revenue Projections

• Life Cycle Renewal Rates

• Cohort Churn

• Renewal Booking Projections

• Total Revenues

• Normalized Contract Values

• Renewal Revenue Projections

• Revenues by Market Segments

• Lost Revenue Projections

• Waterfall Analysis

• Average Deal Size

• Backlog

Bringing it all together

Cost of Customer

Acquisition

Sales and Marketing

Process

Channels

Life Time Value

Funnel Metrics

Monetisation Options