Managing SaaS Metrics Throughout the Company Lifecycle (Part 2)
In our last post, we talked about the different metrics you need to focus on at your different stages of growth. Now we’ll take a look at the processes required to produce and manage the metrics that drive financial transformation.
SaaS companies evolve and grow in roughly similar ways – regardless of whether they are High ACV or High Velocity companies. This provides a roadmap for growth and context on what they need to prepare for in the next stage. Further, it shows how the workflows are interconnected so that as process owners start to emerge when companies scale, they see the power of working together across departments.
It is important to put systems in place to automate these steps, thus enabling the company to build the infrastructure required to produce the SaaS metrics we discussed in Part 1.
In the Seed Stage, to keep things simple, entrepreneurs often put in the following. The goal at this stage is to get Product-Market fit and focus the energies and finances of the company there, with just enough process in place to allow the CEO to focus on engineering and seeding the market:
- A customer relationship management (CRM) system to track leads;
- A Payroll system to stay on top of your #1 expense, People;
- And some simple tools to track Accounts Payable and Accounts Receivable (A/P and A/R) to keep the lights on
As companies move on to the Early Stage, and they cross the chasm in their sales, they look at how to capitalize on their early market traction:
- How to automate their Order Entry, connecting their Quoting and Financial systems,to speed cash-flow
- Creating subscription billing options to best draw in their prospects to doing business together and to differentiate from their competitors
Then, when reaching the Growth Stage, scale becomes even more complex. They start going through the tornado of accelerating volume, and need to share the financial insights across more of the company to stay connected in making decisions on how to steer through fast-paced times.
- The high ACV firms start looking at how to handle the Professional Services Automation (PSA) component of their deployments in order to keep customer satisfaction up while staying on top of the costs and resource allocation
- Companies start looking at tightening the Quote to Cash process to automate the hand-off between SalesOps and Finance and to better manage pricing decisions and invoicing.
- Both firms will also expand their Financial Reporting to drive more analytics on EBITDA and Free Cash Flow to be proactive in communicating their trajectory to the Board and to one another in making data-driven decisions on the P/L
- In addition, Revenue Recognition at this stage gets more complicated, particularly with the new ASC 606 regulations coming into effect shortly.
Once you reach the Public Stage, firms look closely at:
- Controls around Governance, Risk, and Compliance (GRC) to ensure they have the path laid for ensuring confidence in their financials;
- Giving even greater predictability on their financials in maturing their budgeting and forecasting capabilities;
- And automating to meet the XRBL standard.
So how do you attack the progression of process automation as you grow? Luckily, Enterprise Resource Planning (ERP) systems have evolved to the point where they are no longer just the system of record, but more so the system of execution. Modern, cloud-based systems have focused from day one on empowering finance teams with deep functionality that automates even complex processes and surfaces the richest financial and operational insights. And by seamlessly connecting your core financial system with the other business systems through web interfaces, the entire organization can stay on the fast track to growth.
Hopefully these insights will help you and your team accelerate growth, and enable your company to win your space. I would love to hear your thoughts and continue this discussion. I encourage you to connect with me on LinkedIn.
David Appel is the Head of Software & SaaS at Sage Intacct, and is passionate about creating great B2B SAAS companies. Over time he has developed a series of SMB, Mid-Market, and Enterprise customer-lifecycle playbooks that focus on creating value for customers, increasing return for shareholders, and building great teams, that have generated over $1.1B in market capitalization for his clients.