Even when your SaaS business is thriving, presenting to the Board of Directors can be incredibly stressful.
Whether you’re a new startup founder, or an experienced entrepreneur, it’s a nerve-wracking experience that requires days of preparation and endless revisions. You want to make sure that your presentation includes all the right data to show exactly how and why your business has grown, and won’t leave you grasping for vital metrics on the spot.
You want to show off your company’s achievements clearly and honestly, as well as openly share your challenges and difficulties. The Board is there to help your business grow, and they need to understand even the most minute details of your business operations.
As the end of the year approaches, you have to pull the numbers for your board deck soon. But what data should you include? And what should you leave out?
Everyone has their own personal, favorite metrics they think show what’s really going on within a fast-growing SaaS startup. However, you have to start by covering the basics. These are the 5 SaaS metrics that you absolutely must include in your end-of-year Board Deck.
Net MRR Growth
Monthly Recurring Revenue is the core of the SaaS business model, measuring the revenue from customer contracts each month. If you want to be even more exact, you can calculate your net MRR, taking into account upsells, downgrades, and churn as well. As long as MRR is steadily growing over time, your SaaS business is generally in good shape. This metric is key to include in any board deck, because it shows the overall financial health of your business. The Board will want to see how your company’s MRR has trended over time — this year, and in years past. Startups can also track their success in terms of specific MRR benchmarks, like $1 million, $10 million and $100 million in MRR.
Bookings Over Time
The Board will also want to see your overall sales bookings throughout the year, because MRR can grow even if sales remain flat. If your team isn’t generating enough new business, it will show in your total bookings numbers. The Board wants to see healthy growth in this metric as well, because it shows a demand for your product in the marketplace and potential for future growth. Bookings shows the Board that your business is truly growing fast, and is on pace to hit sales goals as well as financial goals.
This vital metric combines two major SaaS metrics into one meaningful number. Payback period is how quickly the business recoups the Customer Acquisition Costs (CAC). You calculate it by dividing the CAC by the MRR per customer. For a SaaS business, it’s vital that customers quickly pay back the cost it took to gain them. If CAC is too high, and the customer MRR is too low, the Payback Period will be very lengthy. This puts the business at risk, because the customer could churn during that time, losing the business money. Even if MRR and sales growth are high, if the Payback Period is too long, the Board will want to know. Generally, a Payback Period of about 12 months is a solid benchmark.
Related to Payback Period, Cash Flow shows that your company actually has enough money to keep the lights on. It’s risky if the company’s CAC is too high, the Payback Period is too long, if revenue growth is slow, or even if hiring rates are too fast and the business can’t afford to pay salaries. Investors always have an eye out to make sure startups aren’t burning through cash faster than they should. While most SaaS startups should not be profitable, they also have to balance growth rates with spending too much cash. It’s a fine balance, and one that investors will want to examine in depth.
Almost as important as MRR is your company’s churn rate, or the rate at which customers cancel their contracts. You must include this metric in your board deck, or else risk being called out. You want your churn rate to be as low as possible, which means that your customers are happy, and generally renew their contracts. No matter how high your MRR or Sales Bookings numbers, if you have high churn, your SaaS business is in trouble. The Board will always request this number, and will want to know how you plan to drive down churn and keep customers happy and engaged.
This list does not include every single metric that you should report to your board, but it does cover the most important, SaaS-specific metrics you must include. You should customize your board deck to your industry, your product, and your specific business needs. However, in SaaS, these 5 metrics are always a must.
by Cara Hogan @CaraHogan27
Cara Hogan is a Content Marketing Manager at InsightSquared, where she is a constant contributor to the Business Analytics blog and the host of the podcast Million Dollar Insights. Cara studied Journalism at Boston University and has written extensively about the intersection of technology and business.