We are re-focusing on growth and my job as finance is to come up with KPIs that we should be looking at regularly. Since we don't have the usual subscription model, it's difficult to track some traditional KPIs such as MRR, Contract Value, etc. Wondering what other revenue-sharing companies use as indicators.
Can you share a little bit more about your model? It could help clarify. But generally, your KPIs, your core KPIs, should be revenue, costs, and profits. If you’re evaluating marketing, your KPIs should be subscriber/demo/trial accounts/leads. If you’re evaluating sales, they should be conversions, leads to conversion percentage. Customer service, etc. but honestly, all business channels have specific KPIs and this should go one level deeper and saying each activity should be strategized and defined up front to lay out the KPIs before engaging. If you’re an early stage SaaS, the tl;dr is signup/trial/subscriber count and revenue. Eventually, you’ll care about the costs and profits, but for right now revenue should suffice.
Don't start with the KPIs, start with the responsibilities.
Think of everybody in your business and list out what your performance expectations are of each person. Then determine how you will know if those expectations have been met: what are the outcomes you will track for each.
Those are your KPIs.
For example: you expect your sales people to sell. That is a fine starting point. But what does that mean?
- Do you expect new clients? And if so how many? At what value?
- Do you expect return business? How much? How often?
- Do you expect up-sells? How often?
- What activities to expect to see to lead to these results?
- How many clients do you expect to see? What percentage of business is new, versus old? Are you high value low volume or the other way around?
This will be a more effective way to find realistic measurements that are both easy to track, and easy to share and "sell" to your employees.
If I can improvise, I'd like to suggest 4 categories within which you can nest KPIs depending on your business model and strategy objectives. These are basic balance scorecard dimensions.
1. Customer (revenue, retention, satisfaction)
2. Service Delivery (quality, timeliness, cost/efficiency)
3. People and Innovation (employee engagement and satisfaction, turnover, innovation)
4. Financials (P&L, cashflow, valuation or balance sheet strength)
I've implemented KPIs and balanced scorecards in very large companies (e.g., Goldman Sachs), very small start-ups and everything in between. At Goldman, my reports ended up on Co-CEOs Paulson's and Corzine's desks every month. They went on to become the US Secretary of Treasury and the US Senator from NJ. I'm sure my reports has a lot to do with it! :-)
I'd love to share with you what I've learned. Set-up a call and I can give some more specific ideas based on our discussion.
Every business is driven by its business model. It should provide very clear structure on your profit influencers. In general in every model you should be able to identify your revenue components (quantity and price) and cost components. Having disassembled your profit into the key components you will be able to derive many common financial ratios. As you are in SaaS B2B segement, you should closely monitor:
1) lifetime value of your customers
2) associated cost of customer acquisition
3) add, churn and net movement of your customer base
4) cost recovery time (how many months of revenue it takes to offset the cost)
And quite a few more depending on your business goals and strategy. Would be happy to hop on a call to explain more.