Presentation by Nicolas Wittenborn on Worst Practices in SaaS metrics at TechChill Baltics conference

1. 9
Worst Practices
in SaaS Metrics
Christoph Janz
Point Nine Capital

2. 9
Worst Practices
in SaaS Metrics
Christoph Janz
Point Nine Capital
TODAY:
NicolasWittenborn

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

4. A new member
!

5. 9
HORROR
worst practices
in SaaS Metrics

6. Image source:

7. Image source:

8. Image source:

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

10. 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!)
• 2 customers
• 1 on a $20/m monthly plan
• 1 on a $120/y yearly plan
=> MRR = $30
Example:
Predictable revenue!
Lifetime value!
Valuation multiple!

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

12. 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!
Don’t forget churn in
your financial plan!

13. 7
worst practice
Ignore your cohorts

14. Cohort analyses are the only way to get a good
understanding of retention and customer lifetimes
Image source:

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

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

18. ttention
nterest
esire
ction

19. AARRR!

20. AARRR!Acquisition
Activation
Retention
Referral
Revenue

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

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

23. 0,00%$
0,50%$
1,00%$
1,50%$
2,00%$
2,50%$
3,00%$
3,50%$
4,00%$
4,50%$
5,00%$
0$
200$
400$
600$
800$
1000$
1200$
1400$
1600$
1800$
1$ 2$ 3$ 4$ 5$ 6$
Visits$ Signups$ Signup$Rate$

24. 0,00%$
1,00%$
2,00%$
3,00%$
4,00%$
5,00%$
6,00%$
0$
200$
400$
600$
800$
1000$
1200$
1400$
1600$
1$ 2$ 3$ 4$ 5$ 6$
Signups$ Website$visits$ Signup$Rate$

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

26. • 100 customers @ $0 per customer
• 20 customers @ $500 per customer
average CACs of $83.33, but
the average is pretty meaningless
Example:

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

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

30. 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.
Vice versa: Maybe it’s
not the sales person?

31. Assume you‘re growing exponentially
2
worst practice

32. • 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
GAIL GOODMAN:
THE LONG, SLOW,
SAAS RAMP OF DEATH

33. Don‘t start tracking KPIs until investors
request it
1
worst practice

35. • 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
Because...

36. Thank you.
Questions?
christoph@pointninecap.com

37. Thank you.
Questions?
christoph@pointninecap.com
Or, if easy ;)
nicolas@pointninecap.com