12 Key Levers of SaaS Success David Skok ForEntrepreneurs Blog - - PowerPoint PPT Presentation

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12 Key Levers of SaaS Success David Skok ForEntrepreneurs Blog - - PowerPoint PPT Presentation

Mar 18, 2024 1.56k likes •2.49k views

12 Key Levers of SaaS Success David Skok ForEntrepreneurs Blog General Partner, Matrix Partners Goals Present a simple model to 1 understand a SaaS business Show what levers a CEO can 2 pull to get the most impact A QUICK PREAMBLE The

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12 Key Levers of SaaS Success

David Skok ForEntrepreneurs Blog General Partner, Matrix Partners

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Goals

Present a simple model to understand a SaaS business

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Show what levers a CEO can pull to get the most impact

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A QUICK PREAMBLE

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Search for Product/Market Fit Scaling the Business Search for Repeatable & Scalable & Profitable Growth Model

The Three Phases of a Startup’s Lifecycle

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Predictable, Repeatable, Scalable, Profitable Growth

Scaling the Business Search for Product/Market Fit Search for Repeatable & Scalable & Profitable Growth Model

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One Sign That You’re Getting There:

Bookings - (NOT Revenue or ARR!)

Quarters

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Simple Model for a SaaS Business

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A Funnel

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The Full SaaS Funnel

Onboard Retain Expand Loyal Customers who are advocates

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The Beautiful Thing about Funnels…

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Governed by very simple Math

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Two Key Levers

Top of Funnel Flow

(Quantity)

Conversion Rate

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Bookings

Top of Funnel Lead Flow Conversion Rate Average Deal Size

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Secondary Funnel Metrics

CAC Time

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Two Sales Motions

Touchless Self-Serve

  • No Sales People
  • Based on Free Trial

Sales People Needed

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The Simple Case: Touchless Self Serve

Visitors to Web Site Sign up for Free Trial Closed Deals

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Funnel Metrics are Essential

"IF YOU CAN NOT MEASURE IT, YOU CAN NOT IMPROVE IT."

  • LORD KELVIN
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The Key Metrics

VISITORS CAMPAIGNS TO DRIVE TRAFFIC TRIALS CLOSED DEALS CONVERSION % CONVERSION %

OVERALL CONVERSION %

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Not All Lead Sources are Equal

Visitors Trial

5% 10% $5,000 Customer

Google Ad Words FaceBook Ads

Visitors Trial

2% 20% $8,000 Customer

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OVERALL CONVERSION %

(BY LEAD SOURCE)

Cost per lead

LTV

ROI by Lead Source

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Fix Conversion Rates First

  • Fix before spending heavily on Traffic growth
  • Three starting points:
  • Improve Product/Market Fit
  • Find the Optimal Customer Segments
  • Clear, Simple, Powerful, Messaging & Positioning
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Funnel Conversion Rate Problems

Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects

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The Source of Most Problems

Vendor-centric funnel design

Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects

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NOT MOTIVATED TO DO

THAT THEY ARE

CUSTOMERS WILL DO SOMETHING

YOU ARE HOPING YOUR

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IN OTHER WORDS…

YOU DESIGNED YOUR FUNNEL THE WAY YOU HOPED IT WOULD WORK…

BUT YOU MAY NOT HAVE THOUGHT ENOUGH ABOUT

THE CUSTOMER’S POINT OF VIEW

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JBOSS EXAMPLE

EMAIL ADDRESS BEFORE FREE DOWNLOAD

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IMPACT

CUT THE DOWNLOAD RATE BY MORE THAN 10X

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FRICTION CONCERNS

Get Inside Your Customer’s Head

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MOTIVATIONS FRICTION CONCERNS

Redesign, or Try to Use What Motivates Them

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JBOSS EXAMPLE

  • Making $27,000 a month selling documentation
  • Solution:
  • Give away documentation

to get their email address

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EXAMPLE: DRIVING TRAFFIC TO YOUR WEB SITE

GETTING FOUND

Not going to find your site unless:

  • Top of Google search
  • Referred to by an influencer

friction & concerns

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LESSONS FROM WEBSITE GRADER

  • Free tools drive viral spread
  • Low customer work required
  • High value delivered
  • Score leverages competitive urge, and acts as a trigger
  • Builds trust through clear demonstration of expertise
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LESSONS FROM WEBSITE GRADER

Shows how the product team can impact the funnel

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MICROFUNNELS

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Take key steps in your funnel…

Free Trial

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… and break them into micro-steps

Free Trial

Get Access to current data and import Invite Colleagues Test Feature Wow!

Moment

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Identify Bottlenecks

Get Access to current data and import Invite Colleagues Test Feature Wow!

Moment

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Fix Using the Same Analysis

FRICTION CONCERNS

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Get Access to current data and import

Redesign

Select Sample Data Invite Colleagues Test Feature Wow!

Moment

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Ideally we’re doing…

Business Goals Decision Criteria Buying Process

Customer

Funnel Design

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So far we’ve looked at the simple case

Touchless Self-Serve

  • No Sales people
  • Based on Free Trial
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What happens when the sale is more complex and needs a sales person?

Sales People Needed

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Without Sales People

Visitors to Web Site Closed Deals

Simple linear relationship

Conversion Rate

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But when you add in Sales People…

Ramp Time Sales Capacity Limit

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Growth Comes in Discontinuous Units

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The Unit of Growth

Sales Person

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Supported by Leads & Customer Success

Sales Person

$’s Marketing Spend SDR’s

Leads Customer Success, Renewals, etc.

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What Drives Bookings?

  • No. of

Sales People

Productivity per Rep (Average)

x

PPR

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Let’s look at each of these in turn…

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Number of Sales People

One of the most common reasons for missing plan Didn’t hire sales people fast enough

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Sales Hiring

  • You will need to build an in-house recruiting machine

See my blog post: “Recruiting: The 3rd Crucial Startup Skill”

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Two Metrics to Track

2 4 6 8 10 12 14 16 18 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17

Number of Reps versus Plan

Reps Plan $0 $500 $1,000 $1,500 $2,000 $2,500 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17

Assigned Quota vs Plan & New ARR

Assigned Quota Plan Bookings

$k

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Lost Bookings due to slow hiring

$0 $500 $1,000 $1,500 $2,000 $2,500 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17

Assigned Quota vs Plan & New ARR

Assigned Quota Plan Bookings

$k

$500k

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Over Assignment

  • f Quota

needed to hit plan =1/85%

$0 $500 $1,000 $1,500 $2,000 $2,500 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17

Assigned Quota vs Plan & New ARR

Assigned Quota Plan Bookings

$k

85%

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PPR: Productivity per Rep

  • Quality of sales hires
  • Sales Training and

Onboarding

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PPR: Sales Training and Onboarding

  • Sales People: One of the most expensive resources
  • Yet, typically little effort is put in to sales training in early days
  • High payback
  • Worth having the founders spend time to develop & deliver a lot of the material
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Monitoring PPR

Charts

3

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PPR over time

$100 $110 $120 $130 $140 $150 $160 $170 Q1 Q2 Q3 Q4

Average Productivity Per Rep

New ARR booked - $k / quarter

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PPR Looked at by Rep Tenure

60 80 100 120 140 160 180 Q1 Q2 Q3 Q4

Average Productivity Per Rep - Grouped by Rep Tenure

6 - 12 months 12-24 months >24 months

New ARR booked - $k / quarter

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PPR by Individual Rep

Rep Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 John 120 165 180 145 80 110 195 Mary 80 110 135 155 150 145 Fred 60 35 75 40 55 Alice 85 145 160 180 145 Joe 60 110 85 130 145 Mike 155 170 145 190 Sarah 35 45 70 45 Sue 80 145 175 165

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% of Reps at Quota

30% 40% 50% 60% 70% 80% 90% 100% Q1-16 Q2-16 Q3-16 Q4-16

% of Reps above 75% of Quota

30% 40% 50% 60% 70% 80% 90% 100% Q1-16 Q2-16 Q3-16 Q4-16

% of Reps above 100% of Quota

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There’s one other thing that drives PPR

Adequate Lead Flow

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THE MAGIC OF FUNNEL MATH

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Raw Lead Marketing Qualified Lead Sales Accepted Lead Opportunity Closed Deal

20% 80% 25% 20%

Funnel Math

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Raw Lead Marketing Qualified Lead Sales Accepted Lead Opportunity Closed Deal

20% 80% 25% 20%

Closed Deal 1 Opportunity 5 Sales Accepted Lead 20 Marketing Qualified Lead 25 Raw Lead 125

Reverse Funnel Math

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Allows Us to Compute Leads Required per Rep

x

  • No. of

Closed Deals

=

Reverse Funnel Conversion Rate Marketing Qualified Leads Required

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This Becomes the Contract Between Sales & Marketing

Marketing Qualified Leads Required Sales Marketing SDR’s

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The Backend of the Funnel

Closed Deals Loyal Customers who are Advocates

Renew Expand Onboard

It’s all about LTV

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Top Factors Affecting Renewals

  • On-boarded successfully?
  • Champion still at the company?
  • Customer getting meaningful business benefits?
  • Is the product Sticky?
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Dollar Renewal Rate is King

See my SaaStr 2016 presentation

Customer Renewal Rate

>

Dollar Renewal Rate

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SUMMARY

12 Key Levers for SaaS Success

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Simple Team Focus: Optimize your Funnel

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Funnel Optimization Meetings

  • Start by diagramming your funnel
  • Draw the micro steps for key parts

e.g. free trial

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Funnel Optimization Meetings Participants

Sales Marketing Product

“Sparketing!”

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Key Levers

  • 1. Product/Market Fit
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Key Levers

  • 3. Conversion

Rate

  • 2. Top of Funnel Lead Flow
  • 4. CAC
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Key Levers

  • 5. No. of

Sales People

(Recruiting)

Productivity per Rep (Average)

  • 6. PPR
  • 7. Enough

Leads

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Key Levers

LTV

8. Pricing 9. Customer Retention Rate

  • 10. Dollar Retention Rate

(Ability to “Land & Expand”)

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Key Levers

Cash to Finance the Business

  • 11. Months to Recover CAC
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Key Levers

Building a Great Organization

  • 12. Recruiting, Onboarding & Management
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For more details on all these topics: forentrepreneurs.com

Presentation Slides: forentrepreneurs.com/saastr-2017