From Series A to IPO: How SaaS Businesses Can Grow Quickly by Applying the Right Metrics
When you’re on a rocket ship, you need continuous feedback to stay on the right trajectory. And fast-moving Software-as-a-Service (SaaS) companies are exactly the same. For SaaS companies at any stage of growth, this means having the latest leading and lag......
When you’re on a rocket ship, you need continuous feedback to stay on the right trajectory. And fast-moving Software-as-a-Service (SaaS) companies are exactly the same. For SaaS companies at any stage of growth, this means having the latest leading and lagging indicators available to make quick, agile decisions about where to focus resources to accelerate growth without running out of cash. Decision makers need to know the right levers to pull—where, when and how to invest to acquire customers, keep customers, evolve the product and drive recurring revenue. But it’s not easy—which is why 92% of SaaS businesses crash and burn within three years. Move Fast and Break Things (Like Your Spreadsheets) Strategic planning and reporting obviously play a critical role in proactively charting your SaaS company’s path forward and pivoting resources to the right revenue drivers. But planning and reporting get complicated when you need to collect a long list of SaaS-specific metrics from across the company in order to inform critical decision making. So, how can your strategic finance team bring data and departments together to create full transparency about the health of your Saas business? How do they help your leaders make proactive decisions about how to fuel growth, navigate uncertainty and keep key stakeholders and investors on board? Let’s look at three key challenges your SaaS finance team can solve to align business-wide planning around the right metrics at any stage of growth—whether you’re securing Series A funding, are going public or are somewhere in between. Challenge 1: Finding the Numbers You Need To Assess Business Performance There are certain KPIs and data-driven benchmarks that SaaS CFOs and business leaders should rely on to understand how the business is performing, where to focus investments and how to align finance and operations to results. For example, the ultimate LTV:CAC ratio is 3:1, which means your customer lifetime value (LTV) should be three times more than your cost of acquisition (CAC) to optimize growth. But calculating this critical metric (and others like it) involves integrating and analyzing a lot of data about different customer segments, marketing channels, product features, customer churn and more. With all of this data flowing in from different systems and teams, this is all easier said than done. It’s difficult for your SaaS finance team to access the data you need to drive informed decision making when it’s scattered across enterprise resource planning (ERP) systems, the general ledger (GL), customer relationship management (CRM) systems, contract/booking systems (GL Subledger), marketing clouds and more. To slice and dice data into the metrics and KPIs that guide planning, finance teams often resort to manually cutting and pasting data into their own spreadsheets, which is slow, error prone and far from real time. Without accurate, complete data, SaaS CFOs and decision makers will drive the company forward based on the wrong benchmarks—and potentially right into the ground. Solution: Create a Single Source of Truth To Get the Latest Metrics at a Glance Stop manually gathering data and start automatically integrating data from disparate systems into a single source of truth so that all financial, sales, marketing, customer, product, employee and market data lives in one place. With easy-to-access, accurate data, your finance team can spend more time analyzing the numbers for better strategic decision making. Budgeting, Forecasting & Financial Reporting Case Study - SaaS Customer Story Learn how Thomas International stopped chasing spreadsheets and built a better FP&A foundation. Challenge 2: Planning for Growth No Matter What Lies Ahead Once a startup has taken off, sustaining growth is the next challenge. And many don’t go very far: of the startups that raise their seed round, less than 10% reach the next stage of investment. Survival means keeping at least a 20% growth rate year over year by continuing to invest where it counts, ensuring speed of impact to the bottom line. However, SaaS subscription models can create a lag between making a sale and collecting the revenue—so run rate and cash don’t necessarily correlate. If margins are too slim, the company won’t survive unexpected bumps in the road. This is why forecasting is critical. SaaS CFOs and decision makers need to understand how different strategies and market conditions impact the road ahead so that they can ensure there is always a path forward regardless of the future’s uncertainties. With scenario planning, your SaaS finance team can see how strategic decisions impact metrics such as sales, operating costs, cash flow and burn rate. By accounting for best-case and worst-case scenarios, you can help leadership put the pedal to the metal knowing they have the fuel to survive … at least until the next round of funding. Solution: Use Real-Time Scenario Planning To Anticipate the Impact of Decisions Guide planning with forecasting and simulation activities that integrate real-time data. With accurate data about the latest financials, you can confidently explore growth opportunities and mitigate risks based on different probabilities. Challenge 3: Keeping the Business Aligned With a Common Vision SaaS teams need to have a common vision for the strategic direction of the company in order to increase their chances of survival. To propel the business forward quickly, everyone needs to be moving in the same direction—from executives and the board, to investors, employees, department heads and budget owners. To create this alignment, teams across the business require ready access to the numbers and insights that guide the way, such as annual recurring revenue (ARR), customer acquisition cost (CAC), retention rates and more. By communicating business performance metrics frequently, SaaS CFOs help build a culture of accountability that keeps everyone engaged in the process and invested in the outcomes. Intuitive dashboards and interactive data visualizations can deliver real-time access to the metrics that matter most. When teams can visually see the trends that tell the story behind your business performance, they can better understand the next chapter and the role they play in the strategic direction of the company. By over-communicating—and doing it often—your finance team will get departments across your SaaS business to buy into the objectives they need to measure their own performance against. If your teams believe it, they will achieve it. Solution: Make Data Easy To Understand With Dashboards and Visualizations Design real-time dashboards and interactive data visualizations to communicate key metrics in a way your entire SaaS team will understand. With easy access to accurate, meaningful data, everyone will understand your business’s trajectory and how they contribute to it. Demand Planning Case Study - SaaS & IT Infrastructure Customer Story Find out how Nutanix connected data sources and created a single source of truth for its key financial processes. Plan for Every Stage of Growth With Vena for SaaS Vena for SaaS gives your finance team complete planning and analysis capabilities within one pre-configured solution built to meet the unique business requirements of SaaS companies. Integrate Data Sources Into a Single Source of Truth Vena automates the integration of disparate data sources into a single source of truth, giving finance teams more time and more accurate numbers for strategic decision making. Create Multiple Plans To Grow With Scenario Planning Vena makes it simple and efficient to adjust key performance indicators in an instant to see how today’s decision making could affect tomorrow’s outcomes. Provide Easy-To-Access Metrics That Matter Vena’s visual dashboards and accurate, easy-to-understand reports help SaaS companies keep all stakeholders informed, aligned and invested in success. Vena for SaaS Learn how Vena for SaaS integrates all of the templates, reports, data models, source system data and business logic needed to support your planning and analysis.