👋Hey there,
Before we dive into this week’s topic, we’re excited to share an FP&A role. Details below:
The Role
Our friend Mike, CFO of Edmentum, is seeking a driven FP&A candidate to support their Commercial Finance team. Here are the details below:
Enjoys working with large scale data and has high end modeling skills
Have prior experience with pricing and discount analysis, SaaS metrics (ARR, LTV:CAC
Role is 100% remote
For more information, apply using the link below:
Now back to this week’s topic.
Driving results
Want to see a real-life, public example of FP&A driving financial results?
We break down Mimecast’s public earnings release.
Drew helped create some of these metrics during Mimecast’s IPO process.
🔥TIP: Here’s what Drew learned during the IPO readiness process.
Tune in and learn how you can create your own metrics to support your company’s success.
Listen on
Case Study: Mimecast
Think about the software you use and pay for right now.
That software is provided by SaaS (software as a service) companies.
And you are contributing to those software companies’ metrics by using and paying for their services.
Mimecast is a SaaS company too, they provide cyber security solutions.
Let’s dive into Mimecast’s public earnings release, which is full of SaaS metrics you can apply to other SaaS companies.
🔥Follow along with us by pulling up Mimecasts external report here.
Show Notes
00:35 - Case study time—Mimecast.
01:30 - It’s all about KPIs and metrics.
01:59 - Constant currency strips out one-time items and fx.
02:41 - AOV (average order value) tells your upsell story.
03:45 - Average product counts indicate customers are willing to buy more stuff.
04:27 - White space can help operationalize upsell using product counts.
05:45 - Customer segmentation is a great way to analyze your customers.
06:34 - Creating metrics starts with a manual spreadsheet, then automation.
07:30 - Lemonade stands can teach us a lot in FP&A 🍋
09:30 - Net revenue retention rate (NRR) combines customer retention and upsell.
11:30 - Look at your own spending habits to assess your NRR with companies.
13:59 - Big finish—you can create KPIs and metrics in FP&A that drive results.
It’s All About KPIs (and Metrics)
Financial and non-financial data is best served when connected to your company’s goals.
How do you do this?
Creating KPIs (and metrics).
🔥TIP: Here’s your essential guide to creating KPIs and metrics.
In FP&A you can help your company create them.
Which influences what you report:
Internally to guide your business partners to achieve their department goals
Externally to tell your company’s performance story to investors
Find what other companies report on in your industry as a starting point.
Examples of SaaS KPIs (and Metrics)
Mimecast disclosed several financial and non-financial metrics to tell its external performance story.
Here are 3 that you can apply to companies you work for:
1. Constant Currency Revenue Growth Rate
Your company’s revenue performance has a bunch of drivers.
Stripping away one-time events and foreign exchange (aka fx) helps to clean up the story you tell.
You can do this in 3 steps:
Step 1: restate your current period revenue results using your base period’s fx rates
Step 2: remove any portion of revenue related to M&A activity that don’t exist in both the base and current period
Step 3: remove any portion of revenue related to one-time events that don’t exist in the base and current period
NOTE: companies will have different approaches to constant currency reporting, the above is one example.
2. Average Product Counts
Your customers buy stuff that your company sells.
The more stuff your customers buy from your company is usually a sign they like buying from you.
It’s a matter of using product counts as your numerator.
And customer counts as your denominator.
🔥TIP: Here’s how to calculate product counts at your company.
3. Net Retention Rate (NRR)
SaaS companies are all about ARR (Annual Recurring Revenue).
NRR can help you assess the health of your ARR.
That’s a lot of acronyms.
Do this by breaking apart your month-over-month results into:
Churn - customers that leave you
Downsell - customers that spend less with you
Upsell - customers that spend more with you
New - customers that are brand new buyers
🔥TIP: Here’s more info on how to calculate customer churn.
🔥TIP: Try segmenting your customers to learn more about them.
Conclusion: You Can Shape Your Company’s Story
In FP&A you can create KPIs (and metrics) at your company.
Don’t stop there.
Help influence your company’s results by connecting them to your company’s daily activities.
That puts you front and center to tell your company’s performance story.
AND helps you influence what future story is told.
As always, let us know if you have any suggestions or ideas you want us to cover by replying to this. We read and reply to every email.
Now go have fun making an impact on your business and your career!
See you next week 👊
Cheers,
Drew & Yarty
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Disclaimer: This content is not investment advice or financial advice. The views expressed and stories told are our own. We may be investors in the companies discussed. Do your due diligence when considering applying what you learn.
How To Influence and Drive SaaS Metrics