This presentation is from my talk at the 2017 SaaStr Annual Conference in San Francisco. It offers an overview of a simple model to understand a SaaS business and the key levers a CEO can pull to get the most impact. The presentation covers: Optimizing the SaaS Funnel: - Get inside your customer’s head - Break down the funnel into microsteps - Identify bottlenecks - Use funnel math to make improvements 12 key levers within the funnel: 1) Product/Market fit 2) Top of the funnel flow 3) Conversion rate 4) CAC (customer acquisition cost) 5) Number of sales people 6) PPR (productivity per rep) 7) Getting enough leads 8) Pricing 9) Customer retention rate 10) Dollar retention rate 11) Months to recover CAC 12) Recruiting, onboarding & management

1. 12 Key Levers of SaaS Success
David Skok
ForEntrepreneurs Blog
General Partner, Matrix Partners

2. Goals
Present a simple model to
understand a SaaS business1
2 Show what levers a CEO can
pull to get the most impact

3. A QUICK PREAMBLE

4. Search for Product/Market Fit
Scaling the Business
Search for Repeatable & Scalable
& Profitable Growth Model
The Three Phases of a Startup’s Lifecycle

5. Predictable, Repeatable, Scalable, Profitable Growth
Scaling the Business
Search for Product/Market Fit
Search for Repeatable & Scalable
& Profitable Growth Model

6. One Sign That You’re Getting There:
Bookings - (NOT Revenue or ARR!)
Quarters

7. Simple Model for a
SaaS Business

8. A Funnel

9. The Full SaaS Funnel
Onboard
Retain
Expand
Loyal Customers
who are advocates

10. The Beautiful Thing about Funnels…

11. Governed by very simple Math

12. Two Key Levers Top of Funnel Flow
(Quantity)
Conversion
Rate

13. Bookings Top of Funnel Lead Flow
Conversion
Rate
Average
Deal Size

14. Secondary Funnel Metrics
CAC
Time

15. Two Sales Motions
Touchless Self-Serve
• No Sales People
• Based on Free Trial
Sales People Needed

16. The Simple Case: Touchless Self Serve
Visitors to
Web Site
Sign up for
Free Trial
Closed
Deals

17. Funnel Metrics are Essential
"IF YOU CAN NOT MEASURE IT,
YOU CAN NOT IMPROVE IT."
- LORD KELVIN

18. The Key Metrics
VISITORS
CAMPAIGNS
TO DRIVE
TRAFFIC
TRIALS
CLOSED DEALS
CONVERSION
%
CONVERSION
%
OVERALL
CONVERSION %

19. Not All Lead Sources are Equal
Visitors
Trial
5%
10%
$5,000
Customer
Google Ad Words FaceBook Ads
Visitors
Trial
2%
20%
$8,000
Customer

20. OVERALL
CONVERSION %
(BY LEAD SOURCE)
Cost per lead
LTV
ROI by Lead Source

21. Fix Conversion Rates First
• Fix before spending heavily on Traffic growth
• Three starting points:
• Improve Product/Market Fit
• Find the Optimal Customer Segments
• Clear, Simple, Powerful, Messaging & Positioning

22. Funnel Conversion Rate Problems
Suspects Suspects
Suspects
Suspects
Suspects
Suspects
Suspects Suspects
Suspects
Suspects
Suspects
Suspects

23. The Source of Most Problems
Vendor-centric
funnel design
Suspects Suspects
Suspects
Suspects
Suspects
Suspects
Suspects Suspects
Suspects
Suspects
Suspects
Suspects

24. NOT MOTIVATED TO DO
THAT THEY ARE
CUSTOMERS WILL DO
SOMETHING
YOU ARE HOPING YOUR

25. IN OTHER WORDS…
YOU DESIGNED YOUR FUNNEL
THE WAY YOU HOPED IT WOULD
WORK…
BUT YOU MAY NOT HAVE THOUGHT ENOUGH ABOUT
THE CUSTOMER’S POINT OF
VIEW

26. JBOSS EXAMPLE
EMAIL ADDRESS BEFORE
FREE DOWNLOAD

27. IMPACT
CUT THE DOWNLOAD RATE
BY MORE THAN 10X

28. FRICTION CONCERNS
Get Inside Your Customer’s Head

29. MOTIVATIONS
FRICTION CONCERNS
Redesign, or Try to Use What Motivates Them

30. JBOSS EXAMPLE
• Making $27,000 a month selling documentation
• Solution:
• Give away documentation
to get their email address

31. EXAMPLE:
DRIVING TRAFFIC TO YOUR WEB SITE
GETTING FOUND
Not going to find your site
unless:
- Top of Google search
- Referred to by an influencer
friction &
concerns

34. LESSONS FROM WEBSITE GRADER
• Free tools drive viral spread
• Low customer work required
• High value delivered
• Score leverages competitive urge, and acts as a trigger
• Builds trust through clear demonstration of expertise

35. LESSONS FROM WEBSITE GRADER
Shows how the
product team can
impact the funnel

36. MICROFUNNELS

37. Take key steps in your funnel…
Free Trial

38. … and break them into micro-steps
Free Trial
Get Access to
current data
and import
Invite
Colleagues
Test
Feature
Wow!
Moment

39. Identify Bottlenecks
Get Access to
current data
and import
Invite
Colleagues
Test
Feature
Wow!
Moment

40. Fix Using the Same Analysis
FRICTION CONCERNS

41. Get Access to
current data
and import
Redesign
Select
Sample Data
Invite
Colleagues
Test
Feature
Wow!
Moment

42. Ideally we’re doing…
Business
Goals
Decision
Criteria
Buying
Process
Customer
Funnel Design

43. So far we’ve looked at the simple case
Touchless Self-Serve
• No Sales people
• Based on Free Trial

44. What happens when the sale is more complex and
needs a sales person?
Sales People Needed

45. Without Sales People
Visitors to
Web Site
Closed
Deals
Simple linear relationship
Conversion
Rate

46. But when you add in Sales People…
Ramp
Time
Sales
Capacity
Limit

47. Growth Comes in Discontinuous Units

48. The Unit of Growth
Sales Person

49. Supported by Leads & Customer Success
Sales Person
$’s
Marketing
Spend
SDR’s
Leads Customer Success,
Renewals, etc.

50. What Drives Bookings?
No. of
Sales People Productivity per Rep
(Average)
x
PPR

51. Let’s look at each of these in turn…

52. Number of Sales People
One of the most common reasons for missing plan
Didn’t hire sales people fast enough

53. Sales Hiring
• You will need to build an in-house recruiting machine
See my blog post:
“Recruiting: The 3rd Crucial Startup Skill”

54. Two Metrics to Track
0
2
4
6
8
10
12
14
16
18
Q4-16 Q1-17 Q2-17 Q3-17 Q4-17
Number of Reps versus Plan
Reps Plan
$0
$500
$1,000
$1,500
$2,000
$2,500
Q4-16 Q1-17 Q2-17 Q3-17 Q4-17
Assigned Quota vs Plan & New ARR
Assigned Quota Plan Bookings
$k

55. Lost Bookings
due to slow
hiring
$0
$500
$1,000
$1,500
$2,000
$2,500
Q4-16 Q1-17 Q2-17 Q3-17 Q4-17
Assigned Quota vs Plan & New ARR
Assigned Quota Plan Bookings
$k $500k

56. Over
Assignment
of Quota
needed to
hit plan
=1/85%
$0
$500
$1,000
$1,500
$2,000
$2,500
Q4-16 Q1-17 Q2-17 Q3-17 Q4-17
Assigned Quota vs Plan & New ARR
Assigned Quota Plan Bookings
$k
85%

57. PPR: Productivity per Rep
• Quality of sales hires
• Sales Training and
Onboarding

58. PPR: Sales Training and Onboarding
• Sales People: One of the most expensive resources
• Yet, typically little effort is put in to sales training in early days
• High payback
• Worth having the founders spend time to develop & deliver a lot of the material

59. Monitoring PPR
Charts3

60. PPR over time
$100
$110
$120
$130
$140
$150
$160
$170
Q1 Q2 Q3 Q4
Average Productivity Per Rep
NewARRbooked-$k/quarter

61. PPR Looked at by Rep Tenure
60
80
100
120
140
160
180
Q1 Q2 Q3 Q4
Average Productivity Per Rep - Grouped by Rep Tenure
6 - 12 months 12-24 months >24 months
NewARRbooked-$k/quarter

62. PPR by Individual Rep
Rep Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16
John 120 165 180 145 80 110 195
Mary 80 110 135 155 150 145
Fred 60 35 75 40 55
Alice 85 145 160 180 145
Joe 60 110 85 130 145
Mike 155 170 145 190
Sarah 35 45 70 45
Sue 80 145 175 165

63. % of Reps at Quota
30%
40%
50%
60%
70%
80%
90%
100%
Q1-16 Q2-16 Q3-16 Q4-16
% of Reps above
75% of Quota
30%
40%
50%
60%
70%
80%
90%
100%
Q1-16 Q2-16 Q3-16 Q4-16
% of Reps above
100% of Quota

64. There’s one other thing that drives PPR
Adequate Lead Flow

65. THE
MAGIC OF
FUNNEL
MATH

66. Raw Lead
Marketing
Qualified Lead
Sales Accepted
Lead
Opportunity
Closed Deal
20%
80%
25%
20%
Funnel Math

67. Raw Lead
Marketing
Qualified Lead
Sales Accepted
Lead
Opportunity
Closed Deal
20%
80%
25%
20%
Closed Deal1
Opportunity5
Sales Accepted
Lead
20
Marketing
Qualified Lead
25
Raw Lead125
Reverse Funnel Math

68. Allows Us to Compute Leads Required per Rep
x
No. of
Closed Deals
=
Reverse Funnel
Conversion Rate
Marketing Qualified
Leads Required

69. This Becomes the Contract Between Sales & Marketing
Marketing Qualified
Leads Required Sales
Marketing
SDR’s

70. The Backend of the Funnel
Closed Deals
Loyal
Customers
who are
Advocates
Renew ExpandOnboard
It’s all about LTV

71. Top Factors Affecting Renewals
• On-boarded successfully?
• Champion still at the company?
• Customer getting meaningful business benefits?
• Is the product Sticky?

72. Dollar Renewal Rate is King
See my SaaStr 2016 presentation
Customer
Renewal Rate
>Dollar
Renewal Rate

73. SUMMARY
12 Key Levers for SaaS Success

74. Simple Team Focus:
Optimize your Funnel

75. Funnel Optimization Meetings
• Start by diagramming your funnel
• Draw the micro steps for key parts
e.g. free trial

76. Funnel Optimization Meetings
Participants
Sales Marketing
Product
“Sparketing!”

77. Key Levers
1. Product/Market Fit

78. Key Levers
3. Conversion
Rate
2. Top of Funnel Lead Flow
4. CAC

79. Key Levers
5. No. of
Sales People
(Recruiting)
Productivity per Rep
(Average)
6. PPR7. Enough
Leads

80. Key Levers
LTV
8. Pricing
9. Customer Retention Rate
10. Dollar Retention Rate
(Ability to “Land & Expand”)

81. Key Levers
Cash to Finance the Business
11. Months to Recover CAC

82. Key Levers
Building a Great Organization
12. Recruiting, Onboarding & Management

83. For more details on all these topics: forentrepreneurs.com
Presentation Slides:
forentrepreneurs.com/saastr-2017