Rev rec must be timely, accurate, consistent and auditable in order to be reliable as a management tool. Strategically, deferred revenue has sizable implications on how cash in the business is managed and invested. This is a CEO’s look at revenue recognition.
Revenue churn is a huge indicator of growth potential. That’s because, even when companies have significant customer churn, they can overcome it with expansion revenue. When you have that, combined with success in new customer acquisition, you have a growth machine that will be hard to slow down. It’s a recipe for success.
SaaS businesses grow at the intersection of customer acquisition and lifetime value. When customers churn they cut short lifetime value and upend the fundamental driver of healthy growth
I will sacrifice luxurious features, chalk them up as ‘nice to haves’, and go with thinner, less cumbersome solutions. I’d much rather have 80% of the features run well 100% of the time than the inverse.
While you may not be able overcome fundamental problems with your product or your go-to-market, the good news is there are actually really effective things you can do to help increase customer retention that aren’t going to come at a high cost.
Everything starts with a sale, and the sales team needs rewards for their hard work. Squeeze budget from every nook and cranny to come up with motivating, useful incentives. But just don’t break the bank.
Even when you manage an efficient income statement, low liquidity in your balance sheet can keep you up at night. Since even founders need to sleep (a little), we need ways to shore up that liquidity without ceding board control or mortgaging our homes.
Plenty of ill-fitting customers will buy your solution if you let them. They are a tempting group, often having velocity in the pipeline. Make no mistake, they are also the devil.
I have lots of ways I like to approach planning and goal setting, depending upon the team, the situation, the company culture and the goals. Planning is contextual—I am equally down for a formal, rigorous, highly detailed plan, or something scribbled out on the back of a napkin. Each has their merits and their place. If you are a leader who eschews planning, but knows you need to do it anyway, here is a simple framework.
Over many years and incarnations, I learned a lot about how to have a happy and healthy SaaS company. Of the health metrics I focused on most, churn was by far the most important as well as the most complex.