Scenario Planning with Confidence - SaaS Finance Peers & VCs Share Tips
Sage Intacct and Next Series Club, a top SaaS finance community group, brought together Great Lakes finance experts to talk about what’s really working for them now. They shared their insights on “what-if” scenario planning and managing investors in uncertain times. Watch the panel session here.
David Appel, Head of Software and SaaS at Sage Intacct, moderated the panel with:
- Tim Compton, Senior VP, Finance, ActiveCampaign
- Corey Greendale, Managing Director, First Analysis
- Tom Kirby, Founder, PrepDD & The Next Series Club
- Jake Saper, Partner, Emergence Capital
Here are their three essential SaaS Finance tips:
Managing cash and churn requires everyone’s participation right now
ActiveCampaign which has 100,000 customers and $100M in ARR, is taking a deep dive into all aspects of its funnel. Tim Compton described how the company is looking at the pipeline through a new microscope- applying it to the sales channel to understand bottlenecks between SDRs and account executives; the efficiency of specific salespeople; and where to expand their team.
On the investor side, Jake Saper advised SaaS Finance teams to get granular on churn and determine what’s happening beyond the pandemic. He recommended doing a finer analysis on the different types of customers lost- looking at their product usage, past behavior, and the impact of COVID-19 on their business. Determine whether churn could be related to the product or the product positioning. Look at product utilization data at a “super” micro level. That subscription management data will often tell you how a customer is positioned to renew and informs any contract negotiation. The key is to tease out the factors that your finance team can control from the macro factors beyond your control.
Continuous scenario planning drives cultural change
VCs are working with their SaaS portfolio companies on scenario planning as well. Corey Greendale explained that First Analysis asks companies to look at their customer base in ways that they might not have in the past- splitting them across industries or customer sizes and high/low risk. First Analysis is also encouraging B2B SaaS companies to have more frequent information exchanges with their investors.
The best-in-class tech companies are making critical cultural changes too. They base their business decisions on financial data. They have both the processes and the subscription management tools to include the broader organization in scenario planning. Then, department leaders can see how revenue and expenses impact different “what-if” situations. With everyone on board, scenario planning gets faster and becomes a more repeatable process for SaaS companies.
Better scenario planning increases board & investor confidence
The panel took a deeper dive into what boards and investors want to see right now. As stay-at-home orders expire across the country, SaaS businesses are developing their recovery strategies; moving away from new logo acquisitions and towards account expansion. Jake Saper pointed out that you may actually shift headcount to your customer success department who can then help your farming AEs. If you have an 18-month cash runway, evaluate your competitors who don't have the cash and can't grow as quickly; that could lead to new spending plans for sales and marketing.
The panel emphasized the importance of frequent check-ins with boards and investors. Be ready with a matrix that shows how your OPEX is affected by macro environments; full-scale open economy vs. regional shutdowns vs. other potential economic scenarios. That will generate more productive check-ins. You and your investors can gauge the scenarios against what’s unfolding real-time and determine the next steps for your SaaS business.
Corey described what he’s looking for in these frequent portfolio reviews; streamlined dashboards and reports on MQLs. How many MQLs are in the pipeline? What's the conversion rate from one stage to the next? With that data in hand, you and your investors can work together to adjust scenarios. You can jump to a different scenario plan if you see new roadblocks or opportunities that weren’t there in the past.
Tom Kirby, the founder of PrepDD, a collaboration solution for finance teams (and Next Series Club founder), sees positive movement in the market. Earlier on, SaaS companies focused on their own internal pipeline and budget. Now stakeholders are beginning to come back into the fold; “What we're seeing is that [companies] are still trying to recalibrate and re-navigate. . . and also know what their budget considerations are internally.”
On another positive note, Corey encouraged all of us in the midst of these volatile times; “We found that we’ve achieved good results when we deployed capital in downturns. . . we are absolutely still looking at and making new investments.”
This is just an excerpt from our dynamic conversation with SaaS finance peers from Illinois, Minnesota, Ohio, and other Great Lakes states. Check-out the session here.
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.