My first serious lesson in the criticality of SaaS metrics was about six years ago when I was unexpectedly stumped in a board of directors meeting. I had just presented the booking plan for the year and one of the Director’s in the meeting said that the plan was good, but we really needed to increase our booking rate. My first reaction was something like: “Well our current booking rate is pretty strong and we’re a SaaS business, so even with no immediate improvement to bookings we’ll continue to pile up revenue quarter after quarter, right?” Wrong! I had totally neglected the impact of churn. At the time, SaaS investors and executives were still getting their heads around the SaaS recurring revenue business model, so there were very few resources to turn to for support. Yet as the person in the room primarily accountable for the top line, I had to have the answer.
Fast forward to today. In 2014, we not only have a much better understanding of the financial levers that drive SaaS business success, we are on the verge of a metrics revolution in the way SaaS businesses are managed. Unlike licensed enterprise software, the SaaS recurring revenue business model offers a much higher degree of stability, measureability and predictability. These three factors form a foundation that enables SaaS executives to take a much more analytical approach to driving SaaS business success. SaaS business executives are uncovering new operational metrics that connect SaaS customer success to SaaS financial success, and in the process are creating recurring revenue machines. Today we are witnessing the emergence of The Metrics-driven SaaS Business.
This is the first post in a new SaaS metrics series inspired by my ongoing collaboration with Bluenose Analytics. This series explores the promise of customer success metrics and their role as the glue that connects SaaS customer success to SaaS financial success. This first post discusses the unique qualities of SaaS that enable a more analytic approach to management than was possible with licensed enterprise software and introduces the concept of the Metrics-driven SaaS Business.
The SaaS Metrics Mandate
Why are metrics so uniquely important in SaaS? Read more »