6 Core Business Functions of a SaaS Company And The Metrics To Measure
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Summary
As you scale your business, you're probably running into the issue where you have a bunch of people that are working, doing stuff, taking action, but you just feel like you're running around like a chicken with its head cut off. Instead of being in a place where you now kind of delegate outcomes and hold your team accountable based on some metrics and some numbers, and have them report to you. That's what's possible and I'm going to show you exactly how to do it.
Transcript
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Hi there, I'm Dan Martell, technology entrepreneur,
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And in this video, I'm gonna share with you the six core
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functions of a SaaS business and the key metrics that you need
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to measure to ensure your leadership team are focused
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We're gonna share with you an exclusive resource called the
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Weekly Sync, the format, the structure of 30 to 45 minute
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meeting you can use with your team to keep them on pace.
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and they'll share with you how to get that at the end.
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As you scale your business, you're probably running into
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the issue where you have a bunch of people that are working,
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but you just feel like you're running around with your,
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Instead of being in a place where you now kind of delegate
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outcomes and hold your team accountable based on some metrics
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That's what's possible and I'm going to show you exactly how
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I've been building companies now for over 20 years.
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I've been blessed to exit my last three and really when I
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started Flowtown and we grew really fast, we ended up raising
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venture capital that I had a ton of people reporting to me,
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Ideally you have somebody in your team managing product
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If you think about it, the only goal of product design and
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road map is to increase the value to the customer and drive
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So what a North Star metric is is that one number that everybody
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agrees that not only captures the value created for your
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customers but the value created in your business, okay?
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So this is, for example, Airbnb's North Star metric is
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bookings per night because that means that they're making money
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and their customers that are using the platform are making
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As a product manager, you want to make sure people that are
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That's a simple, NPS is usually what it's called,
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and it's a growth number because it tells you so much.
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The simple question is how likely are you to recommend our
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And there's a mathematical equation to figure that out.
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as you build new features, as you improve the product,
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and you want your product lead to own those numbers.
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now you gotta give it to the engineering department
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but the ones I'm gonna recommend, one is active defects.
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if the engineering team's building things right,
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you should have a great process for code development.
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Velocity is a measurement of productivity using a point
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system and you guys can debate amongst your dev team on how
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to do that, trust me, I have some very nerdy friends that
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But the core essence is we have stories that get built which
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come from the product team and we're able to build some level
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the velocity on a sprint cycle, usually a two week cycle.
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So that's another number you'd want to make sure that it's
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You know, if you're not doing unit testing or other kind of
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testing, you need to start and just ask yourself for these
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core functions in our code base, what's the percent test
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And that'll let you know at a high level, again,
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there's many others, how efficient and how mature your
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development and your engineering team are behaving.
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This is probably my favorite because it's very easy to
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At the end of the day, somebody should be leading marketing and
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they should be accountable for your few core areas.
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What's the MQLs, the Marketing Qualified Leads?
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To do that, they need to figure out who your core customer is
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and how they get in front of that customer and what's the
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message, but at the end of the day, they're driving number of
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The other thing you want to add on top of that is visitors.
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If you're doing social media, you're doing inbound content,
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you're doing partnerships, that number should be going up.
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If you're writing blog posts and it's not moving anything,
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And then finally, what's the cost per acquisition?
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If you spend time and or money and put that together
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what's your cost per acquisition from your marketing lead.
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again, maybe you're doing this function as well,
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and really just to make sure that they understand
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How many demos on a weekly basis are you doing?
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Of those demos, what percent of them end up becoming customers?
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Then finally, if you're closing those customers,
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what's the new MRR being added every month to the top line?
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So net monthly reoccurring revenue, the new MRR.
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And then also, I wanna know the average revenue per account.
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but on a per account basis, is the average going up over time?
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But to me, it's really mapping out that experience and
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ensuring that those new customers get activated and
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But to ensure that that person in customer success is doing the
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right things and taking action, you want to follow or you want
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So if they've got some kind of support ticketing system, how
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Because if that gets backlogged, you know there's going to be a
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Two is you want to figure out what's the expansion MRR.
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So how many opportunities is your customer success team
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identifying, ideally they're doing things like QBRs or EBRs,
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quarterly business reviews or executive business reviews.
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they could check accounts and see if there's opportunities
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Again, I think that customer success needs to own that as
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much as product because that's going to tell you so much about
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how the customer's experiencing or interacting with your team
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As I mentioned, core functions in a SaaS business.
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It's operations and finance and here's why is you obviously
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need the right reporting for your business and you need to
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make sure that somebody's taking care of the team and the
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pipeline and the hiring and all that fun stuff.
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So the first core metric for ops and finance is ENPS.
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It's the employee net promoter score which is a different
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question but the same concept and it just asks, you know,
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how likely are you to recommend our company to friend or
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You want to make sure that your, somebody's got a pulse on
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your team and to know that they're good because at the end
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of the day your product isn't being built by robots.
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Good people equals great product and process and then,
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The other thing is you need to implement the SAS Metrics 2.0.
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essentially designed a spreadsheet and says here are
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all the metrics and kind of the funnel that you need to be
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You can get these for free using tools like ProfitWell,
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So the SaaS Metrics 2.0, the most recent version is probably
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your best bet especially for your B2B SaaS founders out
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So Greg Crabtree wrote an incredible book called
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Simple Numbers that gets you understanding how businesses
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work and I know you're like, well I'm a venture-backed
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business and our economics are totally different.
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Trust me, doesn't matter, you wanna know that when you spend
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a dollar it's actually contributing to the top line,
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you understand how much overhead have just in the management
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side and are you profitable on a month-to-month basis even if
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you're not to what degree so you can map your run rate.
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So there's the financial metrics that's modeling,
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that's a financial model which is simple numbers.
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Then you have your SaaS metrics which are high level how the
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business is operating from a SaaS point of view.
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your finance person get clear on what's important
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So quick recaps, one, product, two, engineering,
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three, marketing, four, sales, five, customer success,
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I hope this served the six core functions and the key metrics,
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but I wanna share with you a resource called the Weekly Sync
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And it's my process for sitting down with my team and reporting
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not only on the wins of our customers and the key projects
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and the rocks that we're executing against but the score
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card which is comprised mostly of the metrics that I just went
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through. So if you want to download a copy of the Weekly
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Sync, click below in the description and you can download
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your copy. It's what I use to manage the heartbeat and the
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rhythm of my companies. And if you like this video be sure to
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click the like button. If you know somebody that it could be
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beneficial to, please share the video with them.
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I appreciate you watching and I'll see you next week.