SaaSOptics Blog

16 Startup Metrics for SaaS Businesses

Posted by SaaSOptics on May 18, 2017 12:47:45 PM

While we write a great deal about SaaS financial operation metrics (like MRR/ARR, CLV and churn), there are many other important general business and product metrics for SaaS businesses. Metrics like gross profit and burn rate are important for any fast-growing SaaS business.

From the article below: "Ultimately, though, good metrics aren't about raising money from VCs - they're about running the business in a way where founders know how and why certain things are working (or not) … and can address or adjust accordingly." 

See the complete post here from A16Z.com.

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MRR vs. ARR

Posted by Clayton Whitfield on May 11, 2017 9:47:50 AM

The Questions

MRR is the most popular method of normalizing recurring revenues for subscription analytics. Normalized revenue provides a clearer picture of performance, especially when reported in categories relative to prior periods.

So, what's up with the less-talked-about cousin, ARR? Are there any real differences, other than the obvious? Why use ARR vs. MRR in your business? How will bankers and VCs react to ARR vs MRR?

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New Revenue Recognition Standard Affects Finance: 4 Key Implications

Posted by Mary Chiaffredo on May 3, 2017 11:35:09 AM

Originally posted on CFODailyNews.com

The Financial Accounting Standards Board’s (FASB) new revenue recognition standard will have a major impact on a number of companies, particularly SaaS companies. ASC 606 will impact SaaS companies in a few key areas: upfront and contingent fees, distinct performance obligations and cost of fulfilling a contract. 

These new standards will take affect in December 2017 for SaaS businesses. Current contracts that end on or after this date must be accounted under both sets of rules. Is your financial operations team prepared for the move to ASC 606? Read the detailed post here.

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Four Ways Spreadsheets Are Failing Your Recurring Revenue Business

Posted by Clayton Whitfield on Apr 25, 2017 10:46:07 AM

There are times in life when making ends meet is the only option. We’ve all faced situations where the only option is to take the path of least resistance or do what is “good enough for now.” Managing the financial operations of a recurring revenue or SaaS businesses is not one of those times.

In their early days, most recurring revenue businesses manage financial operations with spreadsheets, which are cobbled together with a number of different tools and then, human effort to bring it home. And while that may be good enough when a business is in its infancy, it creates a lot of chaos, overhead and problems down the road.

The good news is that it’s never too late to put a plan in place for solid financial operations that will serve your SaaS business now and in the years to come. If you’re managing your SaaS finances using spreadsheets, it’s probably time to reconsider your approach. Here’s why:

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4 Terms You Should Know Before Raising Startup Capital

Posted by Tim McCormick on Apr 19, 2017 5:05:45 PM

We’ve all experienced the fact that hindsight is 20/20. But, as a CEO, looking back at a missed opportunity that could have changed the trajectory of your business can be especially difficult. I recently wrote an article on VC-List about the importance of anticipating the financial metrics you’ll need as your SaaS business grows.

As entrepreneurs, we learn so many things as we go down the path to starting and growing a business. It can be difficult to know which financial processes to put in place and which metrics matter as you juggle leadership and operations. 

When you first start out, you're focus is on growing the business. And one day, you realize that the financial operations you started with aren’t scaling with your growing business and can't provide the metrics you need when you’re ready to raise capital. While VCs and private equity professionals don’t expect the CEO of an early stage company to be a CFO, they will expect financial data for insight into your company’s performance and future projections. It’s important, as early as possible, to capture the right metrics and have them available to share with investors in a way that will make your startup more valuable.

Take a proactive smart approach to financial operations because no one wants to say, “I wish I knew then what I know now.”  Read the full article on VC-List.com.

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Why Go GAAP Early in SaaS?

Posted by Clayton Whitfield on Apr 5, 2017 3:29:55 PM

In most emerging and growth SaaS businesses, the focus is on cash flow and growth. Bookkeeping and choice of accounting methods is many times left to whoever is sending the invoices and paying the bills. And the method tends to be whichever is easiest and least expensive. Since you have to file taxes and for most early stage companies, taxes are done on a cash basis, then the company books tend to remain that way. What you save in bookkeeping costs may really cost you in the end.

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Can't Afford a Full-Time CFO? Here Are 3 Options to Try

Posted by Bryan Schuler on Mar 29, 2017 2:52:40 PM

Originally posted by Entrepreneur.com.

Cash is king during the early stages of a SaaS business, and your focus is on growth and scale. That's why it can be difficult to justify hiring a full-time head of finance. However, it's crucial to have mature financial operations and the ability to understand your business using accurate financial forecasting, reporting and analytics. On the tactical front, you also need to know where you can cut down on costs in order to grow successfully.

In this blog post, Peter Daisyme, a content contributor for Entrepreneur.com, outlines 3 alternative solutions to a full-time CFO. Read the full post here.

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What Exactly Is Your Income Statement Telling You?

Posted by Bryan Schuler on Mar 15, 2017 4:47:26 PM

Originally posted by Entrepreneur.com.

If you're a founder of a growing SaaS business, you may not have a full-time finance expert on your team (yet). This is oftentimes the case in early stage growth - it can be hard to justify the cost of a CFO or strategic head of finance. However, you can still make financially informed decisions using your financial statements. You just need to know how to read them.

In this blog post, Doug and Polly White, content contributors for Entrepreneur.com, outline 6 insights you can get from your financial and income statements. Read the full post here.

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5 Questions Every Owner Should Ask Their Controller

Posted by Mary Chiaffredo on Mar 9, 2017 10:57:21 AM

Originally posted by DrivenInsights.com

At most companies, a controller is the chief financial officer and heads the accounting department. At others, a controller is the accountant with assistants. He/She is responsible for the company's financial statements, general ledger, cost accounting, payroll, accounts payable and receivable, budgeting, tax compliance, and various special analyses. Whether your controller is a CFO or a senior accountant, and whether you have an in-house controller or you outsource the role, it's important to have a good understanding of what is required of them and that they're working toward your business goals.

In this blog post, Driven Insights outlines the 5 key questions that will give you insight and confidence in your SaaS finance operations. As an outsourced finance department for small businesses, they understand how crucial mature finances are to a growing SaaS business and guide you through the process, leading you to successful business growth. Read the full post here.

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The Subscription Model is the New Standard

Posted by David Ryan on Mar 1, 2017 4:57:50 PM

Magazines, newspapers, life insurance, phones, security services, and a long list of products and services have been sold for decades using the subscription model. What has changed?

The model has not really changed, but the relative importance has. The difference now is how important and meaningful the subscription model has become to the national economic engine. Technology is the undisputed future of the biggest economy in the world, and the subscription model is quickly becoming the dominant business model. Technology companies attract huge amounts of venture capital and the best, brightest, and most innovative workers in the world. The stakes are high, competition is intense, and the pace is brutal.

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