Day 2 of Newstalk SaaS Bootcamp

1. SaaS Bootcamp
Sales & Marketing Metrics
Harry Largey
CEO, CloudMover
3rd February 2016

2. 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

4. Machine Elements

5. Part 1
Designing Sales & Marketing
Processes

6. 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.

7. 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

8. Sales Stages

9. Part 2
Aligning to the Customer Purchase Journey
Building Components

10. 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

11. What does a customer discovery to
success journey look like?

12. 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

14. Part 3
Building Funnels

17. Your Sales and Marketing Funnel

18. 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%

19. Part 4
Allocating Resources
Cost of Customer Acquisition (CAC/CCA)
& Customer Life Time Value (LTV)

20. How do I engage the customer?
Field Sales Tele Sales
Classic
Marketing
Digital
Marketing

21. 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

22. So what should your org look like?

23. 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?

24. 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

25. 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

26. 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

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

28. 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

29. Churn
Excerpt from: Joel York – Chaotic Flow

30. Upselling
Excerpt from: Joel York – Chaotic Flow

31. Cost of Acquiring a Customer (CAC)

32. Exercise E
At your table, model out a CAC example
Present back to group

33. 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€

34. 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€

35. 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

36. 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

37. Bringing it all together
Cost of
Customer
Acquisition
Sales and
Marketing
Process
Channels
Life Time Value
Funnel Metrics
Monetisation
Options