- I should stop and like,
I don't know, I guess I could see it in the analytics,
how long people waited until they bounced.
(upbeat music)
Five Cs of SaaS Metrics in today's video,
I'm gonna share with you guys how to figure out
what do you need to focus on, the key elements.
Not everything 'cause there's so many.
I mean, I've seen dashboards that are just littered
with numbers that, when I ask, it's like,
how often do you look and make decisions with that number?
The answer is never.
But, you know what, they like to have the data.
And then there's on the opposite side,
there's people that have no information, no numbers,
they just know that their revenues kind of are moving
a little bit but they don't know where the opportunity lies.
In this video, I'm gonna share with you how to get clarity,
focus, clear five metrics that are,
when you're building a SaaS product,
you need to know these in almost daily, weekly intervals so
that you can make better decisions
amongst your product team.
When I was building Flowtown, we went out to raise money,
our series A, and the frustrating part for me,
and that's why I'm shooting this video,
was every time I talked to an investor it seems like each
investor had their own
interpretation of the metric, right?
And I was just like, okay, how can everybody have,
you're all making the same investments in these types of
companies but you all have a different way that you think
and you slice the number.
So, what I wanted to do,
and I'm gonna link up the video by Andreessen Horowitz
on metics and SaaS metrics in general,
and that is, to me, the bible.
That's where you wanna go.
If you're curious about some of the elements
we're going to talk about today, go read those definitions,
because those to me are the bible
and the authorities out there.
So, the first one is Cash.
And cash may sound interesting and simple, but, truth is,
is there's a different between revenue and billings,
'cause those, again, is an area where people
get messed up with.
Cash, to me, is how much money you have
in your bank account, minus the amount of money
that you owe to other people, typically payables.
That is your cash position.
It's very important as a SaaS product to
understand that number, because if you know what it cost to
grow the business, you know how much cash it's gonna take,
or if you've raised money and you have a runway,
then you can divide those,
the monthly overhead by the cash
and that gives you the amount of time you have
to figure out your business.
So number one is Cash.
Two is Churn.
Churn, churn, churn.
Everybody talks about churn.
There are several different types of churn.
The easiest one to measure is last month to this month,
how many customers did you lose?
That's your monthly churn and then you can throw that up to
the annual churn to get that number but that is one that you
need to have your pulse on because it doesn't matter how
fast you grow or the traffic,
if you've got a high churn then essentially you could be
turning over your whole freaking customer base
every six months.
I've seen this with startups.
Some companies, every three months, they have a huge churn.
20% month over month churn, that's five months
and you're whole customers that started five months ago
are not the same customers that you're serving today.
And it's funny because you can actually grow doing this
but it makes it really hard to sustain, so churn.
Second is, your CMRR,
or Customer Monthly Recurring Revenue.
They're C's, these five are the five Cs.
CMRR, some people call 'em MRR,
it's your monthly recurring revenue.
Now, the key with this one is it does not include,
'cause this, again, people wanna throw in numbers
and make them sound better,
one time setup fees, it does not include any equipment's,
it doesn't include any other
transactions to the monthly, 'cause sometimes it'll be like,
well it's a monthly fee plus X amount for contacts
or imports or some other data point,
it's the monthly recurring revenue that is the CMRR,
you wanna make sure that you know that.
Number four is CAC.
CAC, CAC, CAC.
I mean, it sounds funny because if somebody does not know
what a SaaS company is,
so that's step one, you gotta make sure when you talk about
your product or your company to your friends and family,
that you explain SaaS.
I mean, you think all your friends live in the Valley
and understand that term?
They don't.
I just call 'em software companies
but you start throwing in the word CAC,
they're like, excuse me?
Customer Acquisition Cost,
what does it cost for you to get a customer?
Here's where most people make the mistake
is they don't look at, they use the blended number.
What's your blended CAC?
Investors do not wanna know that
and for you, you don't wanna know that.
You wanna understand what's your paid, organic,
and then blended, so you wanna make sure that you get
all three of those because every one will have
a different cost associated to it.
Commissions that you're paying joint partners,
affiliates, paid ads, those are all gonna impact your CAC
per channel so you need to make sure you understand that.
And then fifth, least but not last, is your CLV,
your Customer Lifetime Value.
Now, many entrepreneurs like to use their
customer lifetime value by using their revenue
times the amount of months that they,
an average customer stays with them.
That is not the way you calculate it.
The right way is to do your contribution margin,
so how much money after you've got the revenue
plus you've associated the cost of goods sold,
how much money it took you to get that customer
times the months that they stick around.
Now, your churn will dictate how many months
so you gotta take that into consideration
and continue to update the equation
but that is how you measure your CLV.
So the five Cs to SaaS metrics are
Cash, Churn,
CMRR, Customer Monthly Recurring Revenue,
your CAC, your Cost Acquire Customer,
and your CLV, your Customer Lifetime Value.
Now, what I wanna ask from you is
below in the comments I wanna know what tools are you using
to manage your metrics, your churn,
anything that you're using to help understand,
get better optics in your business.
Leave a comment below and if I get enough
I might throw in a couple of my own suggestions for you.
So if you're interested, you go first
and then afterwards I might pop in the comments
and share a few of my own.
As per usual, I wanna challenge you to live a bigger life
and a bigger business and I'll see ya next Monday
If you liked this video, be sure to subscribe to my channel
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Hope you're having an incredible day
and I'll see ya next week.