Ray Rike’s Post

"𝑰𝒕'𝒔 𝒏𝒐𝒕 𝒕𝒉𝒆 𝒔𝒕𝒓𝒐𝒏𝒈𝒆𝒔𝒕 𝒔𝒑𝒆𝒄𝒊𝒆𝒔 𝒕𝒉𝒂𝒕 𝒔𝒖𝒓𝒗𝒊𝒗𝒆, 𝒏𝒐𝒓 𝒕𝒉𝒆 𝒎𝒐𝒔𝒕 𝒊𝒏𝒕𝒆𝒍𝒍𝒊𝒈𝒆𝒏𝒕, 𝒃𝒖𝒕 𝒕𝒉𝒆 𝒎𝒐𝒔𝒕 𝒓𝒆𝒔𝒑𝒐𝒏𝒔𝒊𝒗𝒆 𝒕𝒐 𝒄𝒉𝒂𝒏𝒈𝒆."     - 𝑪𝒉𝒂𝒓𝒍𝒆𝒔 𝑫𝒂𝒓𝒘𝒊𝒏 📉 In the midst of analyzing the 2024 SaaS Metrics Benchmarking data we have collected - the above quote jumped into my mind SaaS Industry Macro Environment Challenges and Changes in 2023: ✔ Buyers more cautious ✔ Interest Rates higher (Cost of Capital higher) ✔ Access to Capital harder (VC investments down) ✔ Growth Rates down ✔ Net Revenue Retention rates down ✔ Win Rates down ✔ Average ACV down ✔ Sales and Marketing budgets reduced ✔ New Customer Acquisition Costs up ✔ Sales Cycles longer SaaS Industry Macro Environment Opportunities in 2024 and beyond: ✔ Generative AI has the potential to change world economies more than the Internet, Mobile or Cloud technologies 👉 The use of generative AI in Finance could boost Global GDP by 7% ($7 Trillion) and boost productivity growth by 1.5% over the next ten years ✔ Data and Distribution are critical competitive moats for the future 🤔 How to create and leverage? ✔ Use of technology in business is growing dramatically in emerging countries 🌐 How to reach, engage & support customers "globally" & "efficiently"? ✔ Consumerization of B2B products and GTM strategies will evolve ❓ What does this mean to UX, Human Capital and GTM motions? ✔ Data is the new oil 😵 Too much data is an issue - what data matters and how to use it? ✔ Cyber terrorism will be the primary battle field of the future 🧱 How to build a security infrastructure that is solid yet adaptable 👆 I was getting lost in the negative industry trends as highlighted by the benchmarks and then realized that change is the "constant" that always provides opportunities for those ready and able to change...

How did Net Revenue Retention (NRR) hold-up in 2023? We are finalizing the analysis of the data from 1,500+ private SaaS companies and the answer is as expected...not great A few additional insights below: Public cloud company NRR decreased from ~ 120% at median at the beginning of 2023 to ~ 110% today Private SaaS company NRR decreased from ~ 105% at median in 2022 to ~100% in 2023 At the same time top line revenue growth rates decreased from a median of ~ 20% in 2022 to ~ 15% in 2023 and ~ 11.4% 2024 Y-T-D (public SaaS companies) Upon detailed quarterly inspection the growth rate story is more instructive: - Growth rate was 24.8% in Q1-22 (median - public SaaS companies) - Growth rate was 17.2% in Q1-23 (median - public SaaS companies) - Growth rate was 11.4% in Q1-24 (median - public SaaS companies) At the same time - CAC Ratio for New Customer Acquisition was up again in 2023 Often macro issues - such as the maturing of the SaaS industry, the work-out of market saturation due to ZIRP era over capitalization of companies and technology buyer/buying maturation are hard to over come in the short term I would love to host anyone on the Metrics that Measure Up podcast who increased NRR in 2023 to share the strategies, tactics and best practices they used to buck the NRR downward trend DM me with any recommendation and we will book their appearance ASAP and/or share your strategy for success below! #b2bsaas #metrics #benchmarks

How have Sales cycles changed in Q1-24? How about average ACV? Vendr just released their Q1-24 "SaaS Trends Report" to help answer those questions - my primary take-aways below: 𝐒𝐚𝐥𝐞𝐬 𝐂𝐲𝐜𝐥𝐞 𝐂𝐡𝐚𝐧𝐠𝐞𝐬: 👉 𝐑𝐞𝐧𝐞𝐰𝐚𝐥𝐬 CY-23 = 53 Days Q1-24 = 69 Days 🤯 16 days represents a 30% increase in renewal cycles in Q1-24 vs CY-23 🔎 Upon further analysis this is up from 51 Days in Q3-23 highlighting a 35% increase in sales cycle for the Vendr customer base over 2 quarters!!! 👉 𝐍𝐞𝐰 𝐂𝐮𝐬𝐭𝐨𝐦𝐞𝐫 𝐀𝐜𝐪𝐮𝐢𝐬𝐢𝐭𝐢𝐨𝐧 CY-23 = 41 Days Q1-24 = 48 Days 🤔 a 7 day sales cycle increase equals a 17% increase 🔎 Upon further analysis this is up from 32 Days in 2020 highlight a 50% increase in sales cycle for the Vendr customer base!!! 𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐀𝐂𝐕 𝐓𝐫𝐞𝐧𝐝𝐬: 𝐍𝐞𝐰 𝐂𝐮𝐬𝐭𝐨𝐦𝐞𝐫 𝐀𝐂𝐕 Q1-22: $101,412 Q4-22: $109,790 Q1-23: $137,042 Q2-23: $21,000 Q3-23: $23,000 Q4-23: $20,000 Q1-24: $27,000 😲 The above change in new customer ACV represents a decrease of 73% since Q1-22 😵 Initially this data point made me dizzy as it suggested that buyers are being much more cautious in how much risk they take when buying new SaaS products - but then upon further reflection there could be OTHER reasons for the decrease such as 👇 👉 Vendr customer base evolved to more and smaller customers 👉 Vendr customer based began purchasing more Usage-Based Pricing apps 👉 Vendr customer base started a more "phased" approach to new solutions I will do a much deeper dive into the changes and what they suggest in a future SaaS Metric Barometer Newsletter and discuss the findings on an episode of SaaS Talk with the Metrics Brothers! I love the data that Ryan Neu and Vendr are publishing quarterly and look forward to seeing it continue to evolve including being segmented by company size and ACV. #b2bsaas #benchmarks #metrics

How does the "growth rate" for a SaaS company endure over time? What are the most recent growth rate endurance trends 🤔 🔎🎧 My metrics brother Dave Kellogg and I discuss Growth Endurance in "TL:DR" detail during the most recent episode of SaaS Talk™ with the Metrics Brothers - highlights below: 📖 Growth Endurance is the measure of how a company's growth rate endures over time: GE = current year’s growth rate / last year’s growth rate 🖊 Bessemer Venture Partners reported that Growth Endurance was ~ 80% as part of their 2021 State of the Cloud report 🧮 Effectively that says that a companies growth rate in the next year will be 80% of the current years growth - example: 70% growth this year would predict 56% next year 🖊 Janelle Teng at BVP recently wrote an article that highlighted Growth Endurance has decreased over the last two years and is NOW ~ 65% - example: 70% growth this year would predict 45.5% growth next year 👆 Growth Endurance decreasing from 80% to 65% may not sound that bad but let's look at the impact over 5 years at a $10M ARR company today: 80% Growth Endurance = $189M ARR in Five Years (starting at $10M ARR) 65% Growth Endurance = $122M ARR in Five Years (starting at $10M ARR) 💯 Using a 6.5x "Enterprise Value to Revenue" multiple that projects a material decrease in Enterprise Value 👇 80% Growth Endurance = $1.23B Enterprise Value in Five Years 65% Growth Endurance = $793M Enterprise Value in Five Years 😱 The change in Growth Endurance translates into a $437M decrease in EV (at the same 6.5x multiple) 🕶 Evercore recently published data that highlighted the Median YoY Quarterly Growth Rates which started and ended in very different places: Q1-22: 24.8% Growth Rate (Median) Q1-23: 17.2% Growth Rate (Median) Q1-24: 11.4% Growth Rate (Median) Q2-24: 10.7% Growth Rate (Projected Median) Q4-24: 12.8% Growth Rate (Project Median) 👆 If Evercore is directionally correct it says that Growth Endurance could increase in 2025 vs 2024 - but the 🔮 is a little cloudy right now! ⚠ The "T2D3" mantra still exists for the first 5 years of a SaaS company's life - but certain benchmarks from 2015 do not always hold the long term test of time or are only applicable to the top decile of companies 🧮 The "T2D3" math: Step 1: Get to $2M Next Year: Triple to $6M Next Year: Triple to $18M Next Year: Double to $36M Next Year: Double to $72M Next Year: Double to $144M 🦉 Dave published an alternative Growth Endurance type model to T2D3 called "56789" which highlights the target ARR at years 5 - 9 of a SaaS companies life: - 5 years to $10M - 6 years to $20M - 7 years to $50M - 8 years to $75M - 9 years to $100M 🤷♂️ If Growth Endurance has decreased by 15% over the past two years and Customer Acquisition Cost & Growth Efficiency have not improved materially over the past 7 quarters it might be time to change <insert ideas here>... #b2bsaas #metrics #benchmarks

In the age of Revenue Growth Efficiency how are we doing as an industry? Sales and Marketing as a % of revenue is down across the board in private and public SaaS companies At the same time over the past 8 quarters... 😲 New CAC Ratio is higher (18.5% higher in two years) 😲 Sales and Marketing expenses as a % of Net New ARR are up 44% at median (over last two years) 😲 CAC Payback Period is longer (25.4 months) per Meritech Capital 😲 Growth Rates are much lower (11 - 13% at median depending on cohort) 😲 Sales (AE) On-Target Earnings are 14% higher (over last two years) 😲 Commission rates at quota have increased from 10.3% to 11.5% 😲 Quota attainment is down by 15% (66% to 51%) 🔬 Details on the why and what to do about lower growth efficiency metrics is the topic of this week's SaaS Barometer Newsletter https://lnkd.in/djHV7JGb

“𝑰𝒕’𝒔 𝒇𝒊𝒏𝒆 𝒕𝒐 𝒄𝒆𝒍𝒆𝒃𝒓𝒂𝒕𝒆 𝒔𝒖𝒄𝒄𝒆𝒔𝒔 𝒃𝒖𝒕 𝒊𝒕 𝒊𝒔 𝒎𝒐𝒓𝒆 𝒊𝒎𝒑𝒐𝒓𝒕𝒂𝒏𝒕 𝒕𝒐 𝒉𝒆𝒆𝒅 𝒕𝒉𝒆 𝒍𝒆𝒔𝒔𝒐𝒏𝒔 𝒐𝒇 𝒇𝒂𝒊𝒍𝒖𝒓𝒆.” - Bill Gates 😊 Nothing makes me happier then when I see a customer, colleague or friend experience success... 😃 When I see a SaaS/Cloud company go public or see a huge financing round that rewards the founder(s) and their employees - I cheer for them as they serve as a "shining light" for founders with a similar dream 😔🤔 The above are moments we celebrate - but I have found that the most valuable lessons I learn are typically from the failures I experience and the mistakes that I make... ...I recently experienced a couple of failures - as highlighted by the "metrics" I had in place to measure the performance of two Benchmarkit experiments 💭 Why this quote of the day? ⭐ Because it reminds me and hopefully a few others that if the "mission" you are pursuing is well understood and the metrics that you are measuring are aligned and used as milestones to achieve the larger strategic vision - it's ok that sometimes goals along the way will be missed - but understanding "WHY" and course correcting quickly is what makes failures a step towards success!!!

Netsuite is presenting their SaaS Financial Management solution at the SaaS Solution Showcase Up next are newcomers Rillet and Campfire Your free access is at: https://lnkd.in/eEYahbKA

Do you ever question how your company uses performance metrics? Have you ever thought there must be a better way to use metrics to... ✔ Establish Goals and Objectives ✔ Motivate and Incent Employees ✔ Inform Decision Making ✔ Establish Priorities ✔ Report to the Board ✔ Manage the Business Dave Kellogg and I discussed 5 root causes leading to 15 primary misuses of SaaS Metrics (from Dave's SaaStr presentation) and the resultant need for a "Metrics Maturity Model" on the latest episode of SaaS Talk™ with the Metrics Brothers 𝐅𝐢𝐯𝐞 𝐑𝐨𝐨𝐭 𝐂𝐚𝐮𝐬𝐞𝐬 𝐭𝐡𝐚𝐭 𝐋𝐞𝐚𝐝 𝐭𝐨 𝐌𝐢𝐬𝐭𝐚𝐤𝐞𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐔𝐬𝐞 𝐨𝐟 𝐌𝐞𝐭𝐫𝐢𝐜𝐬: 1️⃣ No shared metrics foundation 2️⃣ No trust in the metrics used 3️⃣ Metrics are not integral to strategy 4️⃣ Culture is not metrics-driven 5️⃣ Metrics are not being used to define business trajectory and long-term goals 𝐒𝐚𝐚𝐒 𝐌𝐞𝐭𝐫𝐢𝐜𝐬 𝐌𝐚𝐭𝐮𝐫𝐢𝐭𝐲 𝐌𝐨𝐝𝐞𝐥: Level 1: Foundation ✔Document Metrics Definitions and Calculations 👉 Pipeline stages, forecast categories, Churn, ACV ✔Semantics - define what words like best case, commit and downside mean ✔Instrument systems for metrics inputs (GL, CRM, Billing, HCM, etc.) ✔Consider Establishing a Metrics Committee Level 2: Trust ✔ Templates, templates, templates ✔Metrics selection & presentation ✔History & context - include footnotes on how metrics are calculated ✔Regular Cadence: which templates used at which meetings? ✔Continuous improvement - fix data at the source, improve templates Level 3: Strategic Linkage ✔Share Company Strategic Goals and What Metrics Measure the Progress ✔Define 4-6 strategic goals and align metrics to those goals ✔Link department, team and individual objectives to the company measurable goals (metrics) Level 4: Metrics Culture ✔Demand numeracy ✔Manage to a regular metrics publishing cadence ✔Metrics conversations are about the business impact NOT the metric's calculation method/accuracy/value Level 5: Trajectory ✔Timeframe -When are metrics goals targeted to be achieved, what are the milestones towards achieving the goal ✔Sequencing - Not all at once - what is the priority order and associated timeframe for each metric's goal ✔Metrics are not momentary - they are a foundational component for long-term and are understood to be "measurements" that are highly correlated to target outcomes 🎧 SaaS Talk with the Metrics Brother to dive deeper into the above!!! #b2bsaas #metrics #saastalk

Income Statements are not exciting and Financial Reporting is hard... ...but necessary if you have investors, want investors and have to file taxes!!! 🤥 OK - I think Income Statements are fun to read and Balance Sheets tell a story - but my wife thinks I am 🤪 when I read 10-K's at night just for FUN!!! 😵 Publishing a "SaaS Income Statement" that any investor can understand, and can scale as the business grows requires a strong finance tech stack 🧮 SaaS Metrics calculations require data from multiple systems that good Finance Management Platforms make easy 🖥📊 Four of the top Finance Technology Platforms for SaaS companies including NetSuite, Sage, Rillet and newcomer Campfire will be demonstrating their platform as SaaS Solution Showcase on Thursday!!! 🙋♂️ Why invest 50 minutes to see a Finance Platform demonstration??? 1️⃣ If it's taking too long to close your books at the end of the month and is taking more time every month - this virtual event might provide new ideas! 2️⃣ If you are having challenges with ARR reporting or revenue recognition this might provide some new ways to manage recurring revenue reporting 3️⃣ If you have multiple entities or business in multiple countries - this might answer some questions on financial consolidation 4️⃣ If you are considering a financing event in the future - but are concerned your financial reporting is not where it needs to be - this is for you 5️⃣ If you are not in finance but would like to understand what goes into an Income Statement - a financial platform demonstration provides insights The SaaS Solution Showcase: Finance and Accounting Platforms Edition is on Thursday, April 25th starting at 10:30AM ET with Ben Murray, The SaaS CFO presenting the findings from his 5th Annual Financial Tech Stack Report 👇 Register below and gain free access to the demonstrations live or on-demand at your convenience...not to mention winning $1,000 #b2bsaas #metrics #saassolutionshowcase