saas financial management "resident expert" consulting offering from the mrr group-the...
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THE MRR GROUP
CONSULTING SERVICES FOR SAAS COMPANIES WHO INSIST ON EXCELLENCE IN FINANCIAL MANAGEMENT
www.themrrgroup.com
The MRR Group offers part-time CFO, FP&A, and Controller Services as well as a “Resident Expert” Consulting Service
BARRY JAHANSETAN : PRINCIPAL AT THE MRR GROUP
✓ BARRY HAS BEEN A CFO FOR 15 YEARS WITH INCREASING OPERATIONAL ROLES✓ BARRY HAS WORKED FOR A DOZEN SAAS COMPANIES
✓ UNIQUE COMBINATION OF SKILLS ACROSS BUSINESS MODELS, OPERATIONS, PLANNING, ACCOUNTING, SYSTEMS, AND FUNDING
✓ BARRY HAS MANAGED IMPLEMENTATIONS OF NETSUITE, AND ZUORA
✓ DIANA YESYPENKO IS A GAAP/NETSUITE EXPERT
✓ PARISA HAMEDANIAN IS A MGR. OF FP&A
THE MRR GROUP
THE PROBLEM
� The significant losses in a SaaS business before it achieves critical mass makes it hard for management and investors to understand, assess, and optimize the performance of the business by just tracking a few high level metrics.
� The management team may not have been exposed to the full array of tools, and financial strategies that will help them optimize their SaaS business.
� Expensive Billing/Subscription Management/ERP implementations without a “Resident Expert” could fall short of management expectations.
THE MRR GROUP
DESIRED OUTCOME
� Management is running a Financially Viable SaaS Business and has the Tools:
� To understand, and measure its Business Performance.� To assess what is Working Well and What Needs to Improve.� To decide which Levers should it Focus on to Drive the Business.� To enable the CEO, and the Investors decide whether to hit the Accelerator, or the Brakes.� To accurately Plan, & Forecast its Revenues, Expenses, Cash Flow, & Capital Requirements.
� To implement the New/Re-engineered Information System within the budget, with minimum disruption to the business while achieving the management objectives.
THE MRR GROUP
USE CASESSTRATEGIC DECISION MAKING
THE MRR GROUP
Use Case I-$8M SaaS Co. with a CAC Payback of Over 50 Mo’s
• The company was going up market. Had hired an 8 person Inside Sales Team, an Enterprise VP of Sales, and an Enterprise VP of Marketing.
• To understand the causes of the high CAC we started segmenting bookings by company size and found that most of the bookings claimed by the Sales Team were coming from the “Self-Serve” side of the business, companies under 1K employees, which had a low ARPA.
• The low ARPA combined with the low Conversion Rate of the enterprise leads, the focus of the marketing campaigns, made the LTV to CAC for these expensive enterprise leads a bad return on investment.
THE MRR GROUP
Use Case II-$20M Rev Infrastructure Co Looking To Be Acquired
• The Co. had not been able to get to its target valuation.• The 1st diagnosis was that the Financials did not bring out the underlying
strength of the business. A high Retention Rate, good CAC Payback, and the suggestion that Valuations should be forward looking as the Co. had a long implementation cycle.
• The key diagnosis was that the company was focused on too many markets. Segmentation Analysis revealed that some markets were flat with a low LTV to CAC, and some were too small to make an investment for growth. I suggested to the company the Jeff Moore philosophy of focusing on the largest vertical with the most momentum until the Co. becomes the leader in that vertical and then expand into other verticals. This change in strategy hit the sweet spot with Private Equity investors and we got the multiple up from 1.5x to 6.0x in the course of one year without bringing in an expensive Investment Bank.
THE MRR GROUP
Use Case III-$3M Rev SaaS Application Co. with High Churn
• The Co. had a Gross $ Churn rate in excess of 4% a Month, or 39% Annually.
• The Co. had been complacent about Churn. Arguing “We just need to bring in more new business to cover what is not getting renewed”. New Bookings were good but because of the Churn overall growth was suffering.
• The diagnosis was to dig into the churn data to give management actionable analysis. We started segmenting Churn by company size. It became apparent that the larger customers which were brought in by the Sales team were the ones churning. Customer Success reach out revealed that Sales has been overselling to these customers.
THE MRR GROUP
TOOLS & STRATEGIES-EXAMPLES
THE MRR GROUP
Is Your SaaS Business In Good Shape?
I. Should the CEO hit the Accelerator?
I. Is your Business in Good Shape?II. Does it meet these Guidelines?III. If so evaluate “Hitting The Accelerator”.IV. If your Business is not in Good Shape
consider more tweaking.
I. Do more expensive Lead Gen Options make financial sense?
Using “Months to Recover CAC”, and working backwards, we can tell that if we are getting paid $500 per month, we can afford to spend up to 12x that amount (i.e. $6,000) on acquiring thecustomer. If we’re spending less than that, we can afford to be more aggressive and spend more.
III. How much can you Spend on each Trial Sign Up? Assume a customer lifetime of 3 years, LTV would be $18K, assume you want to keep “LTV to CAC”at 4X, so you have $4.5K to acquire a customer, assuming a Conversion rate of 10%, you can spend $450 per Trial Sign-Up.
IV. Which Segments are most Profitable? Which Business Segments show the highest “LTV to CAC” or quickest return. Target and invest in those Business Segments.
THE MRR GROUP
MONTHS TO RECOVER CAC-BEST MEASURE OF TIME TO PROFITABILITY & CASH FLOW
THE MRR GROUP
“Resident Expert” Role Overview in Netsuite/Zuora System
Implementations
THE MRR GROUP
The “Resident Expert” Role in a System Implementation
• Project Planning and Project Management.• Process Definition and Process mapping.• Ensuring the OEM services team is configuring the system
consistent with Best Practices and not simply automating what the company does today.
• Ensuring there is a plan to appropriately onboard and train the team and the rollout plan is reasonable.
• Having seen many prior implementations, Barry would act as a Resident Expert to ensure the internal team at the company does not fall prey to common mistakes and pitfalls because for the most part, they haven’t been a part of successful implementations in the past.
THE MRR GROUP
