12 Key Levers of SaaS Success. David Skok ForEntrepreneurs Blog General Partner, Matrix Partners

Transcription

1 12 Key Levers of SaaS Success David Skok ForEntrepreneurs Blog General Partner, Matrix Partners

2 Goals 1 Present a simple model to understand a SaaS business 2 Show what levers a CEO can pull to get the most impact

3 A QUICK PREAMBLE

4 The Three Phases of a Startup s Lifecycle Search for Product/Market Fit Search for Repeatable & Scalable & Profitable Growth Model Scaling the Business

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

6 One Sign That You re Getting There: Bookings - (NOT Revenue or ARR!) Quarters

7 Simple Model for a SaaS Business

8 A Funnel

9 The Full SaaS Funnel Onboard Retain Expand Loyal Customers who are advocates

10 The Beautiful Thing about Funnels

11 Governed by very simple Math

12 Two Key Levers Top of Funnel Flow (Quantity) Conversion Rate

13 Bookings Top of Funnel Lead Flow Conversion Rate Average Deal Size

14 Secondary Funnel Metrics CAC Time

15 Two Sales Motions Touchless Self-Serve Sales People Needed No Sales People Based on Free Trial

16 The Simple Case: Touchless Self Serve Visitors to Web Site Sign up for Free Trial Closed Deals

17 Funnel Metrics are Essential "IF YOU CAN NOT MEASURE IT, YOU CAN NOT IMPROVE IT." - LORD KELVIN

18 The Key Metrics CAMPAIGNS TO DRIVE TRAFFIC VISITORS OVERALL CONVERSION % CONVERSION % TRIALS CONVERSION % CLOSED DEALS

19 Not All Lead Sources are Equal Google Ad Words FaceBook Ads Visitors Visitors 5% Trial 2% Trial 10% 20% $5,000 Customer $8,000 Customer

20 ROI by Lead Source Cost per lead OVERALL CONVERSION % (BY LEAD SOURCE) LTV

21 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

22 Funnel Conversion Rate Problems Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects

23 The Source of Most Problems Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Vendor-centric funnel design

24 YOU ARE HOPING YOUR CUSTOMERS WILL DO SOMETHING THAT THEY ARE NOT MOTIVATED TO DO

25 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

26 JBOSS EXAMPLE ADDRESS BEFORE FREE DOWNLOAD

27 IMPACT CUT THE DOWNLOAD RATE BY MORE THAN 10X

28 Get Inside Your Customer s Head FRICTION CONCERNS

29 Redesign, or Try to Use What Motivates Them FRICTION CONCERNS MOTIVATIONS

30 JBOSS EXAMPLE Making $27,000 a month selling documentation Solution: Give away documentation to get their address

31 EXAMPLE: DRIVING TRAFFIC TO YOUR WEB SITE friction & concerns GETTING FOUND Not going to find your site unless: - Top of Google search - Referred to by an influencer

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34 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

35 LESSONS FROM WEBSITE GRADER Shows how the product team can impact the funnel

36 MICROFUNNELS

37 Take key steps in your funnel Free Trial

38 and break them into micro-steps Free Trial Get Access to current data and import Invite Colleagues Test Feature Wow! Moment

39 Identify Bottlenecks Get Access to current data and import Invite Colleagues Test Feature Wow! Moment

40 Fix Using the Same Analysis FRICTION CONCERNS

41 Redesign Get Access to Select current data Sample Data and import Invite Colleagues Test Feature Wow! Moment

42 Ideally we re doing Funnel Design Customer Business Goals Decision Criteria Buying Process

43 So far we ve looked at the simple case Touchless Self-Serve No Sales people Based on Free Trial

44 What happens when the sale is more complex and needs a sales person? Sales People Needed

45 Without Sales People Visitors to Web Site Conversion Rate Closed Deals Simple linear relationship

46 But when you add in Sales People Ramp Time Sales Capacity Limit

47 Growth Comes in Discontinuous Units

48 The Unit of Growth Sales Person

49 Supported by Leads & Customer Success Leads Customer Success, Renewals, etc. $ s Marketing Spend Sales Person SDR s

50 What Drives Bookings? x No. of Sales People PPR Productivity per Rep (Average)

51 Let s look at each of these in turn

52 Number of Sales People One of the most common reasons for missing plan Didn t hire sales people fast enough

53 Sales Hiring You will need to build an in-house recruiting machine See my blog post: Recruiting: The 3 rd Crucial Startup Skill

54 Two Metrics to Track Assigned Quota vs Plan & New ARR $2,500 Number of Reps versus Plan Assigned Quota Plan Bookings 18 $2, $k $1, $1, Reps Plan $ Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 $0 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17

55 Assigned Quota vs Plan & New ARR $2,500 Assigned Quota Plan Bookings $2,000 $k $1,500 $500k $1,000 Lost Bookings due to slow hiring $500 $0 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17

56 $k $2,500 $2,000 $1,500 $1,000 Assigned Quota vs Plan & New ARR Assigned Quota Plan Bookings 85% Over Assignment of Quota needed to hit plan $500 $0 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 =1/85%

57 PPR: Productivity per Rep Quality of sales hires Sales Training and Onboarding

58 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

59 Monitoring PPR 3 Charts

60 New ARR booked - $k / quarter PPR over time $170 Average Productivity Per Rep $160 $150 $140 $130 $120 $110 $100 Q1 Q2 Q3 Q4

61 New ARR booked - $k / quarter PPR Looked at by Rep Tenure 180 Average Productivity Per Rep - Grouped by Rep Tenure months months >24 months 60 Q1 Q2 Q3 Q4

62 PPR by Individual Rep Rep Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 John Mary Fred Alice Joe Mike Sarah Sue

63 % of Reps at Quota % of Reps above 75% of Quota % of Reps above 100% of Quota 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% Q1-16 Q2-16 Q3-16 Q % Q1-16 Q2-16 Q3-16 Q4-16

64 There s one other thing that drives PPR Adequate Lead Flow

65 THE MAGIC OF FUNNEL MATH

66 Funnel Math Raw Lead 20% Marketing Qualified Lead Sales Accepted Lead 80% 25% Opportunity 20% Closed Deal

67 Reverse Funnel Math Raw Lead 125 Raw Lead 20% Marketing Qualified Lead Sales Accepted Lead Opportunity Closed Deal 80% 25% 20% Marketing Qualified Lead Sales Accepted Lead Opportunity Closed Deal

68 Allows Us to Compute Leads Required per Rep x = No. of Closed Deals Reverse Funnel Conversion Rate Marketing Qualified Leads Required

69 This Becomes the Contract Between Sales & Marketing Marketing Marketing Qualified Leads Required Sales SDR s

70 The Backend of the Funnel It s all about LTV Closed Deals Onboard Renew Expand Loyal Customers who are Advocates

71 Top Factors Affecting Renewals On-boarded successfully? Champion still at the company? Customer getting meaningful business benefits? Is the product Sticky?

72 Dollar Renewal Rate is King Dollar Renewal Rate > Renewal Customer Rate See my SaaStr 2016 presentation

73 SUMMARY 12 Key Levers for SaaS Success

74 Simple Team Focus: Optimize your Funnel

75 Funnel Optimization Meetings Start by diagramming your funnel Draw the micro steps for key parts e.g. free trial

76 Funnel Optimization Meetings Participants Sales Marketing Product Sparketing!

77 Key Levers 1. Product/Market Fit

78 Key Levers 2. Top of Funnel Lead Flow 3. Conversion Rate 4. CAC

79 Key Levers 7. Enough Leads 5. No. of Sales People (Recruiting) 6. PPR Productivity per Rep (Average)

80 Key Levers LTV 8. Pricing 9. Customer Retention Rate 10. Dollar Retention Rate (Ability to Land & Expand )

81 Key Levers Cash to Finance the Business 11. Months to Recover CAC

82 Key Levers Building a Great Organization 12. Recruiting, Onboarding & Management

83 For more details on all these topics: forentrepreneurs.com Presentation Slides: forentrepreneurs.com/saastr-2017