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# SaaS Metrics Guide | Amplify.LA

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This guide will introduce you to the essential metrics and methods of starting a Software-as-a-Service business, including what’s often overlooked.

We’ve broken it up into 3 steps:
- Step 1: Track Key Metrics (Churn Rate, Customer Acquisition Cost, Lifetime Value...)
- Step 2: Metric Decomposition (Not all metrics are created equal)
- Step 3: Marketing Strategies (How to keep customers coming back to your site)

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### SaaS Metrics Guide | Amplify.LA

1. 1. AMPLIFY SAAS METRICS GUIDE @AMPLIFYLA
2. 2. AGENDA NOT ALL METRICS ARE CREATED EQUAL CHURN RATE, CUSTOMER ACQUISITION COST, LIFETIME VALUE... HOW TO KEEP CUSTOMERS COMING BACK TO YOUR SITE STEP 2: METRIC DECOMPOSITION STEP 1: TRACK KEY METRICS STEP 3: MARKETING STRATEGIES @AMPLIFYLA THE FUNDAMENTALS AND METRICS OF SAAS This guide will introduce you to the essential metrics and methods of starting a Software-as-a-Service business, including what’s often overlooked. We’ve broken it up into 3 steps: 2
3. 3. STEP 1: TRACK KEY METRICS @AMPLIFYLA3 CHURN RATE CAC LTV LTV : CAC EARLY-STAGE LTV QUICK RATIO MAGIC NUMBER SOME METRICS WE’LL COVER IN THIS GUIDE: "If you cannot measure it, you cannot improve it” – Lord Kelvin, devised the absolute temperature scale
4. 4. STEP 1: TRACK KEY METRICS THE PERCENTAGE OF CUSTOMERS WHO LEFT YOUR SERVICE IN A GIVEN PERIOD @AMPLIFYLA Trying to add more users to counter a high churn rate is like trying ﬁx a leaky bucket by adding more water – you need to patch up the hole Sales Targets Subscribers Repays Repays Repays {Conversion Rate Churn Rate { 4 CHURN RATE
5. 5. CUSTOMER ACQUISITION COST CAC LTV HOW MUCH IT COSTS TO MOTIVATE YOUR CUSTOMER TO SUBSCRIBE LIFETIME VALUE (LTV) THE NET PROFIT ONE CUSTOMER PRODUCES CAC = Acquisition Spending # Customers Acquired from Marketing LTV = Recurring Revenue Churn Rate LTV : CAC RATIO LTV > CAC A ratio of at least 3 is important for growing companies beginning large marketing campaigns. ☑ @AMPLIFYLA5 STEP 1: TRACK KEY METRICS
6. 6. EARLY-STAGE LIFETIME VALUE For early stage companies, LTV might not be a reliable metric since your early churn rate may not be accurate. To account for this, using a conservative ﬁxed number of months (e.g. 36 months) to recalibrate your LTV: Early-stage LTV = 1 - (1 - Churn Rate)36 Churn Rate @AMPLIFYLA6 SOURCE: JEFF BUSSGANG STEP 1: TRACK KEY METRICS
7. 7. QUICK RATIO MAGIC NUMBER EXAMPLE KEY STATS DEFINITION KEY STATS 4 A Quick Ratio of 4 is often a benchmark investors looking at high growth SaaS companies 0.5 - 1.0 If it’s greater than 1, you should accelerate growth @AMPLIFYLA QR = New MRR + Expansion MRR Churned MRR + Contraction MRR How much of your business is growth compared to your churned revenue MN = (QRR2 - QRR1) x 4 Marketing Expenses During Quarter A Quick Ratio of 3 would mean that for every dollar lost in a month, 3 dollars are added DEFINITION Indicates the health of your company from the perspective of growing quarterly recurring revenue EXAMPLE A Magic Number of 3 would mean that for every dollar lost in a month, 3 dollars are added If it’s less than 0.5, rethink your marketing strategy 7 STEP 1: TRACK KEY METRICS
8. 8. STEP 1: TRACK KEY METRICS MEASURE THE LOYALTY THAT EXISTS BETWEEN YOU AND YOUR CUSTOMERS @AMPLIFYLA8 NET PROMOTER SCORE Detractors 1 2 3 4 5 6 7 8 9 10 Passives Promoters 0 NPS Score = % Promoters - % Detractors DETRACTORS ARE USERS WHO RATE YOUR SERVICE “0-6” PROMOTERS ARE USERS WHO RATE YOUR SERVICE “9-10” 10%75% PROMOTERS 15% PASSIVES DETRACTORS = 10% 15% 75% 65 NPS SCORE
9. 9. COMPOUNDED MONTHLY GROWTH RATE WEEK 1 RETENTION DEFINITION @AMPLIFYLA CMGR measures the periodic growth of a company (new subscribers, revenue, etc.) DEFINITION The percentage of active users after 1 week of subscribing or installing 9 STEP 1: TRACK KEY METRICS CMGR = Latest Month First Month )( - 1 1/# of Months “Using CMGR also helps you benchmark growth rates with other companies” – Jeﬀ Jordan, General Partner at Andreessen Horowitz "Week 1 Retention (W1) has one of the biggest impacts on your retention over time" – Brian Balfour, VP Growth, Hubspot Up to 80% of users typically stop engaging with your service just within the ﬁrst week of signup Engaging as many users as possible during that critical ﬁrst week is essential to keeping exponentially more active users a month or year after signup
10. 10. STEP 2: METRIC DECOMPOSITION Choosing Key Metrics Not all metrics are created equal. Depending on the size and stage of your company, certain metrics will provide more value and insight into your business than others. For example, if your business was founded two months ago, tracking Lifetime Value (LTV) might not make sense. For smaller and growing companies, account churn can indicate your business’s overall health. Metric Components Break down your top level metrics into their underlying components. For example, Customer Acquisition Cost (CAC) can be broken down into your total marketing expenses and your new acquired customers. Net new customers can be broken down into new, churned, and unsuccessfully on-boarded customers. Breaking down your metrics allows you to create a model that enables you to visualize your traction by tracing back from a top level metric back to its component parts. Repeat ARPU Churn Rate Gross Margin @AMPLIFYLA LTV 10 SOURCE: RJMETRICS
11. 11. DRIP MARKETING IS A SET OF MARKETING EMAILS THAT ARE AUTOMATICALLY SENT OUT ON A SCHEDULE YOU CAN INCLUDE BEHAVIORAL EMAILS THAT ARE SENT BASED ON TRIGGERS OR ACTIONS YOUR USER MADE Shares on Facebook Day 7 Watches Video Day 2Subscribes Thank you email Engaging video Sponsored email More content Tag as “Engaged” Tips for Power Users Newsletter Suggest upgrade to Pro version Option to share on social media Repeat cycle with new users @AMPLIFYLA11 STEP 3: MARKETING STRATEGIES
12. 12. CALL-TO-ACTION BUTTONS SNIPLY Sniply adds your custom call-to-action to any page on the web, allowing you to engage your followers through every link you share. CLICKTALE Clicktale provides heatmaps and link analytics to help you better understand how your website is engaging your users Call-to-action buttons can be crazy eﬀective at converting sales targets to paying users Some products to consider using: SOURCE: SNIPLY SOURCE: CLICKTALE @AMPLIFYLA12 STEP 3: MARKETING STRATEGIES
13. 13. SAAS COMPANIES IN THE AMPLIFY PORTFOLIO unGlue builds consumer SaaS software to help parents limit the amount of time and content their children consume on any screen and device, at home and away Alon Shwartz Estify works with the car manufactures to create, organize, and standardize proper repair data so that the repair centers and insurance providers can know exactly how to ﬁx vehicles to their pre-accident condition. Jordan Furniss Bitium provides app management, single sign- on and analytics for more than 1,500 cloud- based apps allowing companies to securely manage their software catalog. Scott Kriz & Erik Gustavson Fama utilizes the open social graph to go beyond the resume, helping companies make smarter hiring decisions. Ben Mones @AMPLIFYLA13 FloQast helps accounting departments collaborate, organize and ultimately lead to more transparency and eﬃciency during the close and reporting process. Michael Whitmire Repost oﬀers monetization, content protection, and a full-suite of distribution services for artists on SoundCloud. Jeﬀ Ponchick & Joey Mason
14. 14. CITATIONS The Top SaaS Metrics Of The Most Inﬂuential Venture Capitalists — Insight Squared SaaS Metrics Guide to SaaS Financial Performance — Chaotic Flow What is the single most eﬀective metric for a SaaS business? — Quora Your LTV Math is Wrong - Seeing Both Sides If You Are Going to Read One Intro Guide to Saas Metrics, This Is It — David Arnoux The Ultimate SaaS Metric: The Customer Lifetime Value to Customer Acquisition Cost Ratio (LTV/CAC) — Dave Kellogg Magic Number Math — Scale Venture Partners 5 Awesome User Engagement Metrics for Growth - Popcorn Metrics Net Promoter Score (NPS) - Netigate SOURCES USED IN THIS GUIDE @AMPLIFYLA14
15. 15. KEEP UP WITH AMPLIFY Want more presentations like this from Amplify? @AMPLIFYLA GET OUR MONTHLY UPDATES: amplify.la/join 15
16. 16. AMPLIFY SAAS METRICS GUIDE JONATHAN RASHTIAN | JONATHAN.RASHTIAN@GMAIL.COM @AMPLIFYLA