Moving from Seed to Series A when running a successful subscription business requires a different approach to how you manage your business, set pricing, compensate your sales team, define and track your key business metrics, and appeal to your board and investors.
And with these differences and priorities emerge new opportunities for SaaS finance professionals to take a leadership role in the success of their subscription business.
To help you better understand where and how best to set yourself up for success, we recently hosted a truly informative webinar you won’t want to miss. In “How to move from Seed to Growth Stage” we highlight the importance Finance plays in building the success of their subscription business through data, insights, SaaS Metrics, automation, and scenario planning.
We had a great combination of guests – Investor, Operations, and Finance – sharing their insights and true gems of advice to give you the advantage to make your subscription business successful:
- Ryan Floyd, Co-Founder and Managing Director, Storm Ventures (link to his YouTube Channel: Ask a VC)
- Poya Osgouei, CEO and Co-Founder, Poya Ventures (link to his Unchartered and Eclectic podcasts)
- Tina Gregory, CFO, Early Growth Financial Services (link to her blog)
10 key takeaways on how CFOs are stepping up as a strategic member of the executive team
- It’s no secret the Six Cs of SaaS Metrics are the fundamental numbers you should be tracking and reporting to your investors and board. Yet we hear time and again how many CEOs fail to truly own and run their business the way investors would like to see according to SaaS metrics like CMRR, Logo Churn, CAC, CLTV, Cash Flow, and others.
- These aren’t just vanity metrics built for investors to see. Truly understanding your SaaS Metrics - growing your revenue while keeping CAC manageable and figuring out how to keep your customers to reduce churn and increase your LTV – are how you should be running your business.
- SaaS Metrics are critical to understand the health of your business - it’s important to develop a compelling financial story. Impressive management teams and CEOs are really crisp with their numbers. Yet when a CEO fumbles in their SaaS Metrics pitch, it reflects poorly on the business.
- Fortunately, the opposite is also true – you can build investor trust and affinity very easily and quickly if you present SaaS Metrics confidently.
- And who best to prepare the CEO for these pitches and provide insight and advice to the management team on pricing, sales, and customer success? It’s not sales, marketing, or engineering! It’s the person closest to the financial data who can accurately pull the contract data, analyze and predict future trends, and report on different scenarios.
- It’s crucial to have a really strong understanding of your growth model, sales efficiency, and economics for your FP&A and cashflow scenario planning.
- A subscription-based business is about building customer happiness - if they aren’t happy, didn’t deploy what you sold them, or are not growing and expanding, they will churn.
- If you truly have a solution that your customers can’t live without, then ask to be paid on the contract upfront – but beware of potential churn issues if you haven’t built your model to get usage up and make your customers successful.
- You have to earn your business month after month, year after year. Subscription businesses are built on relationships - the sale is not done when the contract is signed. You now have to keep them happy and help them grow.
- Having the right tools and systems in place to scale your business is also paramount. One often under-appreciated view into your business is Cohort Analysis. When you segment your customer data by the common period your customers started with your company (usually by month), take a look at how long you are keeping these customers, whether they continue to expand and buy new offerings, their consumption or usage of your platform, and their overall happiness with your company and product. This gives you a view to the future that you wouldn’t otherwise see. With a bit of scenario planning, if your cohort is expanding, then maybe you could lower your annual contract value (ACV) initially – but only if that would expand and accelerate acquisition of customers who will expand in the future. A subtle tweak to the pricing model can lead to immense gains for the company.
Subscription CFOs – we’re here to help you grow your SaaS startup
The multipliers in SaaS are amazing, so understanding the fundamentals of your subscription business are key to growing.
To learn more, please tune in to our on-demand webinar on growing your SaaS business from Seed to Growth Stage. This is only a small fraction of what you’ll learn from our panel of guests.
For more on how Sage Intacct can help you scale your SaaS business, please check out more SaaS Metrics and Subscription Management resources for customer videos, how-to tutorials, and overall insights built for finance leaders.