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If You’re Building a SaaS, Are You Making This Mistake?

Steve Zehngut

If you are building a Software as a Service (SaaS) offering, you’ll likely get a lot of advice about how to do it right, and even more advice about what not to do.

That’s not what we’re here to do. Our advice is much more foundational.

We do think this piece of advice from Jason Lemkin (former CEO of EchoSign, sold to Adobe) is right on.

First just establish your baseline, for better or worse, in each key metric.  Then once you’ve measured them, set goals of improving each at least 20% (or whatever amount) annually, with interim quarterly goals:

  • Obsess about decreasing churn.
  • Obsess about increasing deal size.  Set a goal here.
  • Obsess about increasing revenue per lead.  Get your efficiency up.
  • Obsess about growing qualified leads month-over-month, ideally in excess of your month-over-month MRR goals.
  • Obsess about increasing “net negative churn”, i.e., increasing the total revenue from all your accounts.
  • Obsess about the number of logo accounts you have, until you have so many it doesn’t matter.
  • Obsess about NPS and customer referrals and satisfaction.  Referrals and second order revenue are the cheapest, easiest way to grow.
  • Obsess about your capital efficiency and sales efficiency, until capital doesn’t really matter anymore.  This is more than just your “magic number”.

And because of that advice, we have our own piece of advice – advice that we hope will protect you from a mistake we see way too often from companies that invite us to help them with their SaaS after they’ve already launched.

These SaaS companies have a lot of data about churn. They have a lot of data about their deal flow and deal size. They have conversion metrics to help them with cost of sale and revenue per lead metrics.

These SaaS companies have data about both referrals and their Net Promoter Score (NPS). They may even have data about their return on invested capital.

You know what they don’t have?

They don’t have their own SaaS instrumented to capture deep analytics around utilization.

And that’s data you can never go back and get. That’s data that if you fail to capture, will only exist from the moment you start capturing.

So whether you’re using Mixpanel or Heap, you need to be capturing utilization data so that you can compare cohorts, evaluate patterns of use, and determine which features need improvement – and which ones you can trash.

But you can’t do anything if you’re not tracking users as they maneuver through your SaaS. That’s something you need to think about from the start.

That’s why Zeek regularly suggests SaaS companies invest in a Mixpanel or Heap account. If you don’t, it’s an easily avoidable mistake you are making.

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