Functional dashboard of select measures which empirically provides strong indication of future growth and performance
Profiles whether an enterprise software producer is likely in, and to remain in, the top quintile of its peer group as it moves through the band from $10 million in annual sales to over $30 million (typically, from 40 to 100 employees and beyond)
3. Sales -
New Rep Productivity
The average new sales representative achieves
productivity after two quarters
Productive is defined as generating period billings with gross
margin greater than 2* the rep’s fully loaded costs
Applies to on premise or I/P/SaaS offerings
Otherwise, there are usually issues with product-market
fit, the selling formula and collaterals have not been
sufficiently distilled, or the C-suite is still too involved in
winning deals to have a fully scalable growth stage
business
David J. Litwiller, 2012
4. Sales -
Win Rate
Win 90%+ of deals that reach a proof-of-concept
implementation or pilot in the top three verticals
Win 80% to 85% of deals that reach a similar stage in
other target verticals
Lower close rates mean too much time is being spent on
deals that aren’t well enough qualified, taking time away
from deals that are winnable
Higher close rates indicate the company isn’t stretching
enough, and winnable opportunities are being defaulted
to the competition
David J. Litwiller, 2012
5. Sales –
Forecast Accuracy
Over the trailing twelve months, the company has
largely met its sales forecast each quarter
Forecast visibility became progressively more
accurate as each quarterly reporting period draws
nearer
Accuracy relates both to the total revenue amount, as
well as the identity of major deals and customers
David J. Litwiller, 2012
6. Sales -
Reportable Pipeline
Reportable pipeline is greater than 5* the amount of
business expected to close over the forward twelve
months
Reportable pipeline = Opportunities rated at 50%
probability of close over the next year, and above
Provides enough buffer for the natural optimism of
sales staff self-reporting
David J. Litwiller, 2012
7. Sales -
Close Rate
Over 67% of deals close in the projected period which
were rated as 75% and above probability to close in
the period – broad indicator of sales funnel accuracy
and upstream funnel health
David J. Litwiller, 2012
8. Marketing -
Corporate
80% of marketing communication establishes and reinforces the
brand image of the company, its thought leadership, and ability to
drive revenue or save costs or risk for customers
20% is dedicated to particular products or features
Every marketing communications event has a quantified target for
active and accepted leads, which is then measured and reflected
upon – especially e-mail, trade shows, SEO and ads (on- and off-line)
E-mail marketing with sufficient tuned targeting to achieve
response rates above 5% - e-mail is typically the most productive
marketing channel for B2B, so high performance e-mail campaigns
correlate strongly with leading financial and strategic results
David J. Litwiller, 2012
9. Marketing -
Analyst
Analyst marketing is based predominantly on a steady
stream of reference-able - ideally, delighted - new
customers with measurable, multi-faceted Return-on-
Investment and softer benefits
David J. Litwiller, 2012
10. Marketing -
Social Media
50% of opportunities which reach 50% probability of
closing come originally from social media and word-
of-mouth
An unambiguous sign of thought leadership in a subject
matter that has currency
Filling the front end of the sales funnel with many low
quality leads is easy; filling the middle of the funnel is a
more discriminating test of whether the business has
real social media impact
David J. Litwiller, 2012
11. Marketing -
Product
Major new releases announced 70% through development, and APIs
50% of the way
Late enough that specifications will be relatively stable and freeze of
market for current release minimized
Early enough to provide partners sufficient reaction time to build
likelihood of strong interoperability at release
Internal roadmap looking out 18 months showing major new
capabilities to be launched at major trade shows or industry events
Marketing and sales regularly synchronize so that they are in step by
the time they are addressing the buying public
David J. Litwiller, 2012
12. Development -
Recruiting
Candidate developers write code during the interview
process – it is very difficult to B.S. code authoring, and
it shows a lot about innovation under
constraints, thinking style and documentation
training
David J. Litwiller, 2012
13. Development -
New Features and Functions (I)
Requirements, specifications and high level design are all
inspected, since about 50% of defects originate there
Related indicator of health: More defects are identified during
inspection of requirements, specifications, and high level
design, than during system test, because of the much lower cost
of finding defects early
Kanbans of two weeks – fast feedback, little scope creep
Work is estimated to half day increments – no exceptions
Development estimates of effort come in within 25% of actual
Work is visible through visual, self-reported status controls
Project managers have deep customer insight with which to
make trade-offs
David J. Litwiller, 2012
14. Development -
Features and Functions (II)
Code inspections are practiced for the most
difficult, sensitive, or defective portions of the code base
The proprietary and modified code base is under 250K
SLoC; productivity is best when the code is very tight and
limited to 50K SLoC
Daily builds with regression testing for unit and integration
test
Less than eight builds at system test to achieve shippable
product
Fewer than 10 defects per KSLoC are found at system test
David J. Litwiller, 2012
15. Development -
Maintenance
Less than 33% of development effort is spent refactoring and
sustaining legacy functionality
Average age of the proprietary and modified code base is less than
four years
Otherwise, internal and external architecture tend to become
outdated, impacting development productivity versus the highest
performing competitors
Maintenance changes to the code are inspected, because of the
high risk of regression setbacks, and, typically, only partial
maintenance programmer understanding of the involved module
David J. Litwiller, 2012
16. Developer Productivity
Growth of development headcount is one third or less
of the rate of revenue growth – strong sign of
scalability, technical wherewithal, and market
relevance
David J. Litwiller, 2012
17. SQA (I)
Tests and test suites are documented as vigorously as the
code, and link directly to use cases
Test plans and test cases are inspected
60% of test cases dedicated to regression, 40% to new
features
Fast changeovers of
environments, versions, configuration, and databases
Monitoring of defect yield by test case and test suite, with
regular pruning and renewal of the tests and test suites
David J. Litwiller, 2012
18. SQA (II)
Tracking of defects by code module
Defects reported in the first year after wide release
are less than 20% of the number found during system
test
Less than 0.5% of defects reported from the field take
more than one week to resolve
Over 70% of defects reported from the field can be fixed
in one day or less
David J. Litwiller, 2012
19. Product Instrumentation
Instrumentation of the product to identify high- and
low-frequency use paths, and why they are used
Watch and learn from best customers about
replicable best practices
Look at unusual cases for innovative product
expansion opportunities
David J. Litwiller, 2012
20. Implementation and Professional
Services
Achieve gross margin of 50% or higher, including
customer and channel partner training
Professional services generate less than 30% of
revenue, to promote ongoing scalability and drive
valuation
David J. Litwiller, 2012
21. Customer Support
Each full time support person supports more than 500
licensed end users (in B2B. Can be much higher in B2C)
Response to 90% of customer issues within 90 minutes
during business hours
Development spends 10% of its time doing direct customer
support, to maintain contact with customer challenges and
external architectural issues and trends
David J. Litwiller, 2012
22. Revenue Growth
On premise: Growing over 50% per year – if you’re
not, someone else usually is and winning share faster
*aaS: Growing over 100% per year – as
above, plus, lower growth means that the scaling
advantages of greater environmental stability are not
being realized
David J. Litwiller, 2012
23. Revenue per Staff
Over US$350,000 per full-time employee per year
David J. Litwiller, 2012
24. OpEx, Cash Flow
and Operating Income
Sales and Marketing expense is roughly two times
R&D expense (R&D includes SQA and Product
Management)
EBITDA over 30%
EBIT approaching 30%
David J. Litwiller, 2012
25. Growth Capital
Growth is funded through gross margin and timing of
working capital in- and out-flows, no longer with
investment capital
David J. Litwiller, 2012
26. Customer Acquisition and
Retention Margin
The cost of acquiring each new customer is known on a
real-time basis
First year gross profit exceeds all sales and technical costs of
winning and onboarding the customer
The cost of sustaining each customers is known on a real-
time basis
The long term portion of a customer’s revenue stream is the
most profitable, and above 90% gross margin beyond year
three of the relationship – a joint measure of customer
preference/satisfaction and technical stability
David J. Litwiller, 2012
27. Customer Satisfaction and Retention
Customer retention after initial contract term well
above 90% annually
Otherwise customer churn takes away too much of the
long term profit stream, and, too much of current selling
has to go to replacing lost business to sustain high
growth
David J. Litwiller, 2012
28. Culture
Every employee vigorously sells the value proposition of the
company’s products and services through their words and actions
There is deeply held and shared pride in what the company
does, and the impact it has for customers, partners and users
Firefighting and diving catches are seen as being caused by
something to be fixed, not an enduring source of heroics to be
lionized
Good and fast are not at odds, the best individuals and teams get
better results and better speed simultaneously by constantly
reflecting upon and improving processes , tools and techniques
David J. Litwiller, 2012
