SaaS Talk™ with the Metrics Brothers

What is the difference between the price and value of a SaaS company? How do metrics such as Enterprise Value to  EBITDA multiples play a role in this discussion? Dave "CAC" Kellogg and Ray "Growth Rike discuss the topic on this episode of SaaS Talk with the Metrics Brother and cover a wide array of topics including:What is a SaaS company worth?What is the definition of "price vs value" in the stock marketExamining Valuation Multiples What They Miss, Why They Differ, and the Link to FundamentalsHow Cash and Debt impacts Enterprise ValueEV/EBITDA vs EV/FCF vs EV/Revenue MultiplesAn inspiration for this episode was from a paper written by Michael Mauboussin with the title: "Examining Valuation Multiples What They Miss, Why They Differ, and the Link to Fundamentals". You can read the paper by clicking here.If you are a SaaS professional or even just interested in learning more about how SaaS companies are valued, this conversation is full of interesting insights and details on the concept of SaaS company valuations.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Trouble shooting Go-to-Market (GTM) issues is a critical competency to master for every SaaS company as they face the pressures of lower growth and reduced revenue growth efficiency. Dave "CAC" Kellogg and Ray "Growth" Rike introduce a GTM trouble shooting framework that addresses the five primary opportunities to improve GTM efficiency.The five key areas of Go-to-Market efficiency opportunities include:Pipeline GenerationPipeline ConversionWin Rates + ACVCustomer RetentionCustomer ExpansionCAC and Growth discuss some of the key metrics that measure the performance and health of each of the above areas. In addition, as two former B2B SaaS operators, they cannot help but dive into some of the key issues and solutions that go beyond "trouble shooting" and move into potential solutions to enhance revenue growth efficiency and improve performance.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Benchmarkit recently published their 2024 SaaS Performance Metrics Benchmark Report based upon 936 B2B SaaS companies participation. Dave "CAC" Kellogg and Ray "Growth" Rike discuss the recent trends and insights.SaaS Metrics and the corresponding benchmarks discussed include:2023 Growth Rates2024 Planned Growth RatesCAC Ratio (Blended, New and Expansion)CAC Payback PeriodNet Revenue RetentionSales and Marketing expenses as a % of RevenueARR per EmployeeThe full report and interactive benchmarking tool can be reached at: benchmarkit.ai/2024benchmarksIf you work in the B2B SaaS or Cloud industry this episode is a must listen!NOTE: Benchmarkit was founded by SaaSTalk co-host, Ray "Growth" Rike"See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Is Pipeline Coverage Ratio simply the inverse of the win rate? Many people will translate a 20% win rate into the need for a 5:1 Pipeline Coverage Ratio - Dave "CAC" Kellogg and Ray "Growth" Rike dive into why that just isn't the case! There are multiple variables that need to be considered including:Win Rate versus Closed-Won Rate Conversion - there is a differenceWhat happens to Pipeline Coverage Ratio when deals are pushed into or pushed out of the quarterHow is Pipeline Coverage Ratio different in a 30 day sales cycle versus a 180 day sale cycleBottom line - why Pipeline Coverage Ratio is NOT as simple as 1/Win RateSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

SaaS Account Executive Benchmarks including On-Target Earnings, Commission Rates, Quota, Quota Achievement, Renewal and Expansion Responsibilities are a few of the benchmarks that Dave "CAC" Kellogg and Ray "Growth" Rike discuss in this episode.Account Executive Benchmarks discussion include:On-Target Earnings (2024 vs 2022)Base Salary and Variable Compensation MixCommission Rates (2024 vs 2022)Quota Assignment by ACVQuota AchievementRenewal and Expansion ResponsibilitiesIf you are leading a B2B SaaS sales team or have one in your company that directly impacts financial performance this is a must listen episode of SaaS Talk with the Metrics Brothers!See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Logan Bartlett, Managing Director at Redpoint Ventures recently shared the Market Overview Report they presented to their Limited Partners in March '24 at their AGM event at the Chase Center in San Francisco. Ray "Growth" Rike and Dave "CAC" Kellogg review the key insights during this episode.Insights that Dave and Ray discussion include:Enterprise Valuations - a return to 2019Growth Rate trends - a return to a time long ago in a land far awayThe value of Growth vs Profitability - the trends and the factsDown Rounds, Shut Downs and No RoundsClick here to get the report and to follow along Dave and Ray's conversation - as they sometimes go off the deep end!See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Rubrik, a cloud industry cybersecurity company went public on April 25th - Dave "CAC" Kellogg and Ray "Growth" Rike break down the key metrics that Rubrik used as the foundation to their S-1 and Initial Public Offering. Those metrics include:Annual Recurring Revenue GrowthRevenue (GAAP) GrowthNet Revenue RetentionSales and Marketing Expenses as % of RevenueFree Cash Flow versus Net IncomeThe Metrics Brothers also discuss the Rubrik transition to a recurring revenue model and the two-tier stock structure used to ensure voting control remains with the founders and early investors.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Dave "CAC" Kellogg and Ray "Growth" Rike discuss how a "growth rate" endures for a SaaS company trend over time!Topics covered during the conversation include:T2D3 Growth Model and Mantra from 2015"56789" Growth Model from Metric Brother Dave "CAC" KelloggThe Impact of Growth Endurance decreasing to 65% in 2023 versus 80% in 2021Growth Endurance is the measure of how a company's growth rate endures over time: GE = current year’s growth rate / last year’s growth rate.At an 80% Growth Endurance (2021 value) says that a companies growth rate in the next year will be 80% of the current years growth- example: 70% growth this year would predict 56% growth next yearGrowth Endurance has decreased over the last two years and is NOW ~ 65% (2023)- example: 70% growth this year would predict 45.5% growth next yearGrowth Endurance decreasing from 80% to 65% may not sound that bad but let's look at the impact over 5 years at a $10M ARR company today but...80% Growth Endurance = $189M ARR in Five Years (starting at $10M ARR)65% Growth Endurance = $122M ARR in Five Years (starting at $10M ARR)Using a 6.5x "Enterprise Value to Revenue" multiple that projects a material decrease in Enterprise Value 👇80% Growth Endurance = $1.23B Enterprise Value in Five Years65% Growth Endurance = $793M Enterprise Value in Five YearsThe change in Growth Endurance translates into a $437M decrease in EV (at the same 6.5x multiple)🤷‍♂️ If Growth Endurance has decreased by 15% over the past two years and Customer Acquisition Cost & Growth Efficiency have not improved materially over the past 7 quarters it might be time to change <insert ideas here>...The "T2D3" Growth Model suggests the below ARR growth for a B2B SaaS companyGet to $2MNext year: Triple to $6MNext year: Triple to $18MNext year: Double to $36MNext year: Double to $72MNext year: Double to $144MThe "56789" Growth Model suggests the below ARR growth for a B2B SaaS companyYear 5: $10MYear 6:$20MYear 7: $50MYear 8: $75MYear 9:$100MIf you are a fan of B2B SaaS and have a desire or need to stay on top of the most recent trends this episode is a great listen!See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Dave "CAC" Kellogg and Ray "Growth" Rike continue their discussion on the SaaS Metrics Maturity Model which includes the below five levels:Level 1: FoundationLevel 2: TrustLevel 3: Strategic LinkageLevel 4: Metrics CultureLevel 5: TrajectoryLevel 1:  Lay the foundationDefinitions and calculationsPipeline stages, forecast categories, close dates, values, SaaS metricsSemantics - what do words like best case, forecast, commit and downside meanInstrument underlying systems (GL, CRM, Billing, HCM, etc)Consider Metrics CommitteeLevel 2:  Build trustTemplates, templates, templatesMetrics selection & presentationHistory & context - always include footnotes on how metrics are calculatedRegular Cadence:  which templates used at which meetings?Continuous improvement - fix data at the source, improve templatesLevel 3:  Link Metrics to Business StrategyIdentify your top challenges Define 4-6 strategic goals - align metrics to those goalsLink department, team and individual objectives to the company metrics (OKRs)Level 4:  Build a metrics cultureDemand numeracyManage to the regular metrics publishing cadenceMetrics conversations about the business impact NOT the metric calculation methodLevel 5:  Agree on strategic trajectoryLong-range, driver-based modelsTimeframe:  When are metrics goals targeted to be achieved, what are the milestones towards goalSequencing:  Not everything at once - what is the priority order and associated timeframe for each metric's goalIf you are a creator, user or participant in how your company uses metrics to measure performance, inform decision making and/or report performance to your boss, your board and your investors this conversation will be valuable!!!See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Dave "CAC" Kellogg and Ray "Growth" Rike discuss the 5 root causes that created the need to develop a SaaS Metrics Maturity Model for companies as they scale.The top five root causes that lead to the 15 primary problems in how companies use metrics include:There’s no shared metrics foundationThere’s no trustMetrics are not integral to strategyThe culture is not metrics-drivenMetrics are not being used define trajectory and long-term goalsThis episode discusses the key challenges in using metrics and the approaches to address those challenges. This discussion builds up to the introduction of the Metrics Maturity Model and the 5 levels of maturity:Level 1: FoundationLevel 2: TrustLevel 3: Strategic LinkageLevel 4: Metrics CultureLevel 5: TrajectoryIf you use, develop or just are a student of SaaS Metrics - this episode is full of insights and ideas on how to accelerate your company's metrics maturity model to level 5!!!See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.