Teamleader Blog Article

SaaStr 2018: The role of a CFO

SaaStr 2018: The role of a CFO

Teamleader headed out to SaaStr Annual in San Francisco, February 6-8: the largest SaaS event in the world. The result: a backpack filled with business and technology insights. We’re happy to share some things we learned with you!

In the SaaS industry, the role of a CFO is not to be overlooked. She’s largely responsible for the strategic direction your business takes. Is your business ready to scale? Do you have the right infrastructure, processes and technology in place to support your global strategy?

A quick summary of the 5 key things a successful CFO should invest in, according to Quora’s Kelly Battles.

1. Automate, automate, automate

Billing, reporting, payments: These things can get very complicated for subscription businesses with all the variables involved. Manual work is time-consuming, inefficient and the risks of errors is huge. This also applies to finance. If you don’t automate what can be automated, employees will become drones and morale will go down faster than you could say Jack Robinson.

Kelly Battles argues “everything ranging from encoding invoices (incoming and outgoing) to billing cycles, payment cycles and reporting should be automated to the highest extent possible.”

After all, operational efficiency is, or should be, the number one priority for a SaaS CFO.

2. Create your own SaaS metrics and reporting

Do you know exactly how your business is doing? Quora’s Chief Financial Officer believes CFOs should step away from ‘standard’ traditional financial models. Examples of these include:

  • Gross profit
  • Net margin
  • EBITDA (Earnings before Interest, Taxes, Depreciation and Amortisation)
  • EBIT (Earnings before Interest and Taxes)

These metrics only lead to the wrong focus. Instead, Kelly Battles argues to focus on:

  • Monthly Recurring Revenue (MRR)
  • Annual Recurring Revenue (ARR)
  • Churn Rate
  • Customer Acquisition Cost (CAC)
  • Lifetime Value (LTV)
  • Net Cash Burn Rate
  • Customer Acquisition Cost / Lifetime Value

While you need these metrics to assess the state of your business, they are quite difficult to calculate - especially if you rely on spreadsheets with unreliable data from disparate systems and complex formulas. You’ll need to make sure the MRR is fully in place to assure the subsequent reporting is up to par.

As time passes and your business moves to new growth phases, other metrics will become more important. The only ones that remain relevant in every phase are MRR and net cash burn.

3. Prioritise growth strategies

Exponentially Increasing revenue will get harder as your company evolves. In SaaS, there are basically ten strategies that will enable you to accelerate growth:

  • Upsell: providing opportunities to purchase related products or services
  • Strategic acquisition: acquiring other businesses to create a synergy with your existing business
  • Usage pricing: pricing model based on how often customers use your service e.g. Stripe
  • Pricing & packaging optimisation
  • Touchless sales: closing sales with little to no sales personnel, e.g. Amazon
  • Assisted sales model: partner programs or indirect sales
  • Move up-market (or expand target market)
  • Partnership strategy
  • Product-related features
  • Expand internationally

It’s impossible to tackle all of them at once. Quora’s advice: select two or three strategies that merit your full focus. Make sure to re-evaluate your choice every so often - your strategy should always depend on the phase your business is in.

4. Be ready to scale 

How are you planning to support growth? “Never build your financial reporting based on where you are today. Instead, build it on where you want to be within 2-3 years.” The same applies to automation: what you do manually today, shouldn’t necessarily be done manually tomorrow. It’s important to be aware of that - and to tackle these issues when they’re still small. Waiting for problems to become emergencies is very expensive, and never a good idea. The only solution then would be to add more people, which contradicts with the scaling phase - as it’s expensive and requires a ramp period.

5. Always prepare for new accounting standards

Make sure you stay up-to-date and proactively follow up on any changes in accounting law. The importance of doing so can’t be stressed enough, especially if you work in an public company (IFRS) or similar environment. The last thing you want, is to lose time adapting to new accounting standards when these have been communicated one year in advance.

Teamleader at SaaStr

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