Keynote by David Skok, ForEntrepreneurs Blog & General Partner, Matrix Partners, at SaaStock on Tour New York, 20th June 2018, KnockDown Center, Maspeth, NYC
4. Search for Product/Market Fit
Scaling the Business
Search for Repeatable & Scalable
& Profitable Growth Model
The Three Phases of a Startup’s Lifecycle
5. Predictable, Repeatable, Scalable, Profitable Growth
Scaling the Business
Search for Product/Market Fit
Search for Repeatable & Scalable
& Profitable Growth Model
6. Also happens to be what Growth Round investors are looking for
7. The key sign that you’re getting there:
Bookings - (NOT Revenue or ARR!)
For SaaS:
Bookings = Net New ARR
(New + Expansion – Churned)
Q1 Q2 Q3 Q4 Q5 Q6 Q7
10. Key SaaS chart: 4 components of bookings
$(15.0)
$(10.0)
$(5.0)
$-
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
Jan Feb Mar Apr May Jun
ARR Bookings
New ARR
Net New ARR
Expansion ARR
Churned ARR
Always look at a
chart that shows the
trendlines to see if
there is growth
34. Number of Sales People
One of the most common reasons for missing plan
Didn’t hire sales people fast enough
35. Sales Hiring
• You will need to build an in house recruiting machine
See my blog post:
“Recruiting: the third crucial Startup Skill”
36. Two Metrics to Track
0
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
37. 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
38. Over
Assignment
of Quota
needed to
hit plan
=1/85%
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
Q4-16 Q1-17 Q2-17 Q3-17 Q4-17
Assigned Quota vs Achieved
Bookings
$k
85%
Assigned Quota
Actual Bookings
40. PPR: Sales Training and Onboarding
• Sales people: one of the most expensive resources
• Yet typically little effort put in to sales training in early days
• High payback
• Worth having the founders spend time to develop & deliver a lot of the material
50. Raw Lead
Marketing
Qualified Lead
Sales Accepted
Lead
Opportunity
Closed Deal
20%
80%
25%
20%
Closed Deal1
Opportunity5
Sales Accepted
Lead
20
Marketing
Qualified Lead
25
Raw Lead125
Reverse Funnel Math
51. Allows us to Compute Leads required per Rep
x
No of
Closed Deals
=
Reverse Funnel
Conversion Rate
Marketing Qualified
Leads Required
52. This becomes the Contract between Sales & Marketing
Marketing Qualified
Leads Required Sales
Marketing
SDR’s
53. The Backend of the Funnel
Closed Deals
Loyal
Customers
who are
Advocates
Renew ExpandOnboard
It’s all about LTV
54. Top Factors affecting Renewals
• On-boarded successfully?
• Champion still at the company?
• Customer getting meaningful business benefits?
• Is the product Sticky?
55. Dollar Renewal Rate is King
This is also what I refer to as Negative Churn
Customer
Renewal Rate
>Dollar
Renewal Rate
61. Negative Churn – Crucial for Long Term Success
Revenue Lost with
2.5% monthly Churn
Renewals
Lost due
to Churn
YEAR 3
$3m $7m
Becomes harder
& harder to
replace this with
new bookings
Renewals
Lost due
to Churn
YEAR 6
$30m $70m
74. A rough estimate of CAC versus Sales Complexity
Freemium
No Touch
Self-
Service
Light Touch
Inside
Sales
High Touch
Inside
Sales
Field Sales
Field Sales
with SE’s
$0-
$10
$50 –
$200
$1,000 -
$2,000
$3,000 -
$8,000
$25,000 –
$75,000
$75,000 –
$200,000
Rough Estimates of Cost of Customer Acquisition (CAC)
75. The relationship is roughly exponential
Clearly adding
Human Touch
dramatically
increases costs
78. WHAT IS YOUR TIME TO
WOW! ?
For more on this topic, see this presentation:
https://www.forentrepreneurs.com/launch-scale-2017/
79. LTV - Importance of Gross Margins
LTV = ARPA * GM%
Churn
This is the simple formula. If you have negative churn, please refer to this blog post:
What’s your TRUE customer lifetime value (LTV)? – DCF provides the answer
https://www.forentrepreneurs.com/ltv/
80. Improving Gross Margins
• Greatest cost is usually people costs in implementation and on-boarding
• Solve by:
• Simplifying the product
• On-line training courses
• Provide in-product training videos and walk-throughs
• Charge a one time fee for implementation
82. The Cash Flow Gap
$(25,000)
$(20,000)
$(15,000)
$(10,000)
$(5,000)
$-
$5,000
$10,000
$15,000
$20,000
$25,000
Month1
Month2
Month3
Month4
Month5
Month6
Month7
Month8
Month9
Month10
Month11
Month12
Month13
Month14
Month15
Month16
Month17
Month18
Month19
Month20
Month21
Month22
Month23
Month24
Net profit - New Sales Hire
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
Month
1
Month
2
Month
3
Month
4
Month
5
Month
6
Month
7
Month
8
Month
9
Month
10
Month
11
Month
12
MRR vs Expenses – New Sales
Hire
MRR
Expenses
Cash
Gap
(Slightly later breakeven point, because Gross Profit is less than MRR)
11 months to
breakeven
83. The SaaS
Cash Flow Trough
$(200,000)
$(100,000)
$-
$100,000
$200,000
$300,000
$400,000
Cumulative Net Profit - New Sales
Hire
23 Months to
get back the
investment
Total amount
invested:
$110k
But a great
return on
investment
84. What happens when we add 2 new sales hires every month?
$(250,000)
$(200,000)
$(150,000)
$(100,000)
$(50,000)
$-
$50,000
$100,000
$150,000
Month1
Month2
Month3
Month4
Month5
Month6
Month7
Month8
Month9
Month10
Month11
Month12
Month13
Month14
Month15
Month16
Month17
Month18
Month19
Month20
Month21
Month22
Month23
Month24
Net profit
$(3,000,000)
$(2,000,000)
$(1,000,000)
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
Cumulative Net Profit
32 Months to
get back the
investment
Total amount
invested:
$2.6m
First profitable
month: 21
Worst loss:
$190k in
month 11
85. Salesperson Unit Economics
• Quota:OTE (On Target Earnings) Should be > 5
• PPR:OTE Roughly > 3.5
• Months to cash flow breakeven for a new sales hire
88. Recruiting is now the
third critical startup skill
The first two skills are:
• Building a product that the market wants to buy
• Building a repeatable, scalable, profitable growth process
For more details, see this blog post: https://www.forentrepreneurs.com/recruiting/
89. Recruiting & Talent Metrics
• % of hires made on time
• Hiring funnel Metrics
• Candidate Acceptance rate
• Average number of candidates in the final interview stage for open positions
• Etc.
• Diversity %
• Retention by category
• Exceptional performers
• Core performers
• OK performers
• Not performing
91. Simple Team Focus:
• Align the whole team around
one goal: Optimize your Funnel
• Use Metrics to drive aligment and
focus
• The end goal: build a Repeatable,
Scalable, & Profitable growth
machine