Category: SaaS

Bloomberg Businessweek has a chart with the sales and marketing costs as a percentage of revenue in the last 12 months for several notable public SaaS companies:

• Workday – 37%
• Salesforce.com – 49%
• ServiceNow – 50%
• NetSuite – 52%
• Marketo – 60%
• Box – 80%

https://twitter.com/guan/status/734536100027478017

A few thoughts:

• These companies clearly believe there is tremendous growth in the market, and investors are backing them up
• While it isn’t this simple, imagine cutting sales and marketing costs by 80% and many of these companies would be very profitable (another reason why it’s reasonable to value SaaS companies at 4 – 6x revenue)
• If these public SaaS companies with scale are spending 50%+ of their revenue on sales and marketing, imagine what the unicorn SaaS companies are spending as a percentage of revenue (hint: well over 100%)

Knowing this, it’s easy to see why Sales-Oriented Startup CEOs are preferred. The most successful SaaS companies are incredibly focused on sales.

What else? What are some more thoughts on sales and marketing as a percentage of revenue for SaaS companies?

One of the lead generation strategies that works well, but takes time and engineering efforts to do right, is micro apps. Micro apps are super simple web applications that do one thing in exchange for providing an email address. Just like people are often willing to give their email address to download an ebook, people are also willing to give their email address for use of a simple micro app that provides value. Here are some popular examples:

• Website Speed Ranker by Rigor
• Website Grader by HubSpot
• Business Name Generator by Shopify
• Fast by Netflix

The key is for the micro app to be meaningful yet self contained with little friction to get value. Often, the value is a tiny piece of what the main product provides such that it’s the same audience and a lead generation opportunity.

The next time you’re thinking about lead generation ideas, consider a micro app.

What else? What are some more thoughts on micro apps for lead generation?

In Mark Roberge’s book The Sales Acceleration Formula, he talks about implementing HubSpot’s first sales compensation plan when they had $300K in annual recurring revenue and 100 customers. Six months later they had 1,000 customers and an annual run rate of $3 million. Today, HubSpot is on a revenue run rate of over $200 million per year (NYSE:HUBS).

From a SaaS perspective, going from $300K ARR to $3M ARR in six months is amazing. Lemkin’s SaaS Law is as follows:

if you can go from $1m to $10m in 5 quarters or less, then your market is huge.

While this HubSpot example is going from $300K to $3M in six months, I’m sure they went from $1M to $10M in five quarters or less. And, of course, today they’re north of $200M run rate, proving that the market is huge.

This is an exceptional example but a great datapoint nonetheless. Entrepreneurs should look for small, fast growing markets that will eventually be huge.

What else? What are some more thoughts on this example of HubSpot having tremendous growth in the early days and that representing a huge market?

Lately I’ve been talking to more entrepreneurs that have product/market fit and are working to find a repeatable customer acquisition process (see 5 Steps to Startup Success in 30 Words). Now, sales and marketing metrics become critical and it’s time to figure out what works. Christoph Janz has the best Google Sheets Dashboard for SaaS companies:

Visitors & Signups

• Visitors
  m/m growth
• Signups beginning of the month
• New signups
  – Organic
  – Paid
• Total new signups
  m/m growth
• Visitor-to-signup conversion rate
• Signups end of month

Paying Customers

• Customers beginning of the month
  – New customers
  – Conversion rate
  – Lost customers
  – Churn rate
• Net new customers
• Customers end of month
  m/m growth

Monthly Recurring Revenue

• MRR beginning of the month
• New MRR
  – New MRR from new customers
  – New MRR from account expansions
• Total new MRR
• Lost MRR
• MRR churn rate
• New new MRR
• MRR end of month
  m/m growth
• Avg. revenue per customer
• Avg. revenue per new customer

Customer Acquisition Costs (CAC)

• Marketing spendings
  – Marketing spendings per signup (blended)
  – Marketing spendings per paid signup
• Sales spendings
  – Sales spendings per new paying customer
• Total CAC (blended)
• Total CAC (paid signups)
• Time-to-recover CAC for paid signups (months)
• CLTV (e)
• CLTV/CAC (paid signups)

Cash

• Cash beginning of month
  – Cash coming in
  – Cash going out
• Net cash burn
• Cash end of month
• Runway at current burn (months)

SaaS entrepreneurs would do well to use the Google Sheets Dashboard for SaaS companies. And, if inside sales is employed, take a look at the Google Sheets Dashboard with Inside Sales.

What else? What are your favorite metrics for SaaS startups?

Jacco Van der Kooij has a great article up titled BANT Sales Qualification for a New Era. BANT (budget, authority, need, timeline) has been around for decades as a way to qualify sales prospects. Personally, I’ve used BANT for many years as it’s logical and a great starting point in the absence of a more specific methodology (most sales people don’t use any methodology). Only, Jacco argues that BANT needs to be modernized based on factors like SaaS being less of an upfront expense so budget isn’t as big of a concern as it used to be, decision making often goes through a process, as opposed to a specific person, and more. Here’s Jacco’s modern BANT with a new order:

• N = Need = Impact on the customer business
• T = Time-line = Critical event for the customer
• B = Budget = Priority for the customer
• A = Authority = Decision Process the customer goes through

Every entrepreneur needs to go read BANT Sales Qualification for a New Era right now.

What else? What are some more thoughts on modern BANT sales qualification?