The hard part isn’t coming up with the plan. The hard part is bearing the stage of “No action” necessary so that the right amount of data can unfold. And then, when you know where you want to go, where you need to be, exactly how you’d like the change to manifest, the steps to getting there lay themselves out the way the Yellow Brick road revealed itself to Dorothy.

“No action” is a stage that I’m really uncomfortable with. I’m confident in my ability to get from point A to point B as long as I know what point B is. But sitting, waiting…that’s hard stuff.

The Argyle management team has been considering a very big question for the past several months. We all had gut reactions to the answer when the question was first posed, and we were relatively aligned. But I have to give a lot of credit to Eric for forcing us to sit in a “no action” period for quite some time. During this time, we had a chance, as a group, to look at the question from a variety of angles and deeply understand what we were doing before we charged right in.

As high-performing, type A personalities, we all wanted to make a decision and run with it. But sometimes big decisions require thought, reflection, and gathering more data. As important as it is for your team to be fast to market, it’s more important to make smart choices.

Be comfortable pausing.

One of the primary tensions that exists in all startups is effort allocation. What do I spend the limited hours in my day accomplishing? The life and death of many startups rides on the early employees’ ability to correctly answer this question. With regard to reporting: if you focus on reporting too early, you’re wasting your time over-building. And if you build reporting too late, you’re wasting your time trying to run your business inefficiently. The question is, when should you make the switch?

Here are some rough guidelines.

Before Product/Market Fit

$0-$2k MRR

Don’t spend a single second measuring or tuning your reporting. Things are changing too quickly for any results you gather to have any meaning or drive towards any beneficial action. If you have ten customers, you can’t show a meaningful churn rate, CAC, or cohort analysis. Don’t bother.

If you have sold any subscriptions, just make sure the integration with your subscription billing platform is working and periodically audit the merchant account deposits with your bank to make sure they add up.

Very Early Revenue Ramp

$2k-$15k MRR

Use exceedingly simple models. You’re starting to grow and want to make sure you have some concept of what’s driving that growth, but you don’t want to spend too much time building systems that might have to get torn up in a month.

Make sure you know roughly where your customers are coming from. Our initial buckets were: advertising tests, outbound sales, inbound marketing, and personal networks. Make sure you know enough to cut advertising tests that aren’t working and expand ones that are.

Early Revenue Ramp

$15k-$83k MRR

This is where things get hairy and you will really benefit from having some serious Excel skills. At this stage, you’re too early to rent or build a really good subscription management tool that will give you all of these reports in an automated fashion. Tools like this will cost a significant percentage of your revenue and can’t really be justified. However, you’ve gone beyond the stage where it’s really appropriate to do seat-of-your-pants reporting. If you have investors, if you’re spending significant sums of money in marketing, and if you want to be able to project the future, you’re going to need some real numbers.

What numbers?

• New, Renewing, and Accruing MRR: Read the BVP white paper if you’re not familiar with these metrics. They’re the core of your business as a SaaS company.
• Customer and Revenue Churn: Lost customers as a percentage of total customers, and lost revenue as a percentage of total revenue.
• Customer Acquisition Cost: How much does it cost to acquire a customer? For paid advertising channels, do a marginal analysis here that just takes into account the channel advertising spend and customers acquired from that channel. Also do an aggregate analysis that includes all sales and marketing costs (including salaries) divided by total customers.
• Average revenue per user (or customer)

What numbers not to focus on:

• Customer LTV: You have no idea what your long-term churn rates will be so you just can’t know this yet. Just take ARPU and multiply by 12 if you want an average yearly value of a customer—compare that to your CAC to guide your marketing decisions.
• Cohort analyses: You haven’t been around long enough and don’t have enough customers for a cohort analysis to make much sense.
• Delta MRR (upsell and downgrade): This is just too painful to measure in spreadsheets. If upsell is a major part of your business and you’re a true spreadsheet hacker, then the very best of luck to you sir. Otherwise, save this for later.

A note on accrual: At this stage, you should already be using looking at your reporting with accruals. Cash is too spikey if you have differing deal sizes and contract terms. One big yearly account can completely change your conclusions if you use cash reporting. It takes a little work to set this up at this scale, but it’s worth it.

Knee of the Curve

$83k-$250k MRR

At this point you have enough maturity and enough data that you should be able to put numbers behind all of your typical SaaS metrics. The more important question at this stage is what systems you’re using to produce these numbers.

My recommendation is that during this stage you migrate away from spreadsheet business analytics and move towards revenue cycle analysis reporting in the systems that you use.

• Most importantly are your financial metrics. At this stage you need to move away from Chargify or Recurly and head on over to Zuora or Aria. The former are easy to integrate with and cheap, the latter provide you all of the reporting you need out of the box, with no spreadsheets required. Say hello to efficiency, accuracy, and scale.
• Customer acquisition reporting will come from either your marketing automation tool (which you definitely need) or your CRM tool. The specific ways you can set this up are myriad, and I plan on doing a full post on this topic in the near future.

What you still shouldn’t be doing, at this stage, is using different accountability measures for different marketing programs. All of your marketing programs need to be attributed in a single system using a single methodology. If you try to use one tool to track in-person marketing and three separate tools to monitor your advertising spend, you’re not scaling efficiently. That’s still too effort intensive at this stage.

Beyond

$250k+

You’re the best judge of this. There is no right answer at this stage. Fortunately, if you’ve made it here, you’re more than smart enough to figure out the answers.

Broadly Speaking

My general advice to folks trying to systemetize their SaaS metrics is to build earlier than they would think is necessary. Having done this now at two rapidly growing companies, I can tell you that building too early is much preferable to building too late. Argyle closes its books every month with about 8 hours of my time, and we produce basically every number that we could want. I spent several weeks developing our models back in early 2011 and since then they have been on autopilot. Do this. Invest the time early before things really start to pick up and when crunch time hits you’ll be able to spend your time on revenue-generating activities rather than back-office details.

Sincerely,

Tristan

I now find myself working in what is really the very early stages of an industry. Things are moving very rapidly from both a competitive and a product landscape. But the things that the industry is doing right now are really baby steps towards the end goals of true social marketing.

The end state is pretty clear: 

• Cookies will increasingly be associated with CRM records (already happening).
• URL shorteners and on-site analytics will converge. Marketers will be able to merge on-site clickstream data with off-site touchpoints.
• Multi-touch conversion pathways will be standard. NoSQL and map-reduce back-ends will allow analytics users to slice audiences in ways never before imaginable. Tracking Facebook Ad > Like > Interactions > Conversion as a conversion pathway will be common. And it will all happen within one tool.
• Word-of-mouth purchase influence will be algorithmically assigned to individual social posts, and aggregated to social properties.

I want to go there now, but there’s so much to build in the meantime.

Patience.

Our designer, Josh, has made every aspect of Argyle look good ever since he started last year. Site, app, marketing collateral—everything that is associated with the Argyle Social brand sparkles. This is somewhat uncommon in the b2b space: conventional wisdom within b2b SaaS is that product and sales come before design and marketing. And yet Josh was the second salaried employee at Argyle.

I think that’s one of the best decisions that Eric and Adam have made. Our interface, our website, and our marketing stand out visually in our crowded market and have become a major competitive advantage for us. Business users care just as much about usability as consumers do, because with usability comes efficiency and results.

In case you’re curious, the whitepaper Thomas was referring to can be found here. Make sure to admire the question mark.

I know this, in part, because I spend a non-trivial amount of my free time playing. I’m good enough to know that I’m not truly good. I also know it because of this guy. I’ve seen every episode of his show since I discovered it in June of last year. He’s brilliant, and surprisingly wise for his age.

I haven’t been excited by sports for probably ten years, but I now watch every major Starcraft professional tournament. I’ll take this over football any day. With it, I get to participate 1-on-1 with great people from around the world, and I get to be on the edge of something new.

Technology is disrupting sports, too, and as usual, the geeks got there first.

…trying to maximize shareholder value is ridiculous. I couldn’t run a company where you had to use that as an excuse for why it was doing things.

This says so many things about entrepreneurship to me. It’s at the heart of why I love small companies. People working towards a specific mission are energetic and approach work like a they’re on a crusade. People working towards increasing shareholder value don’t really give a shit (unless you’re paying them really big bonuses, which creates its own problems).

Credit for that quote goes to Rob Kalin. (Almost) equal credit goes to Fred Wilson for his response:

The shares our firm bought in Etsy back in 2006 have gone up in value more than 10x based on the last stock purchased in the company (last summer). One of the things I’ve learned over the years by working with special people like Rob is that you can create shareholder value as “exhaust” by focusing on an alternative mission, one that is closer to real problems faced by real people.

Shareholder value is a byproduct of running a successful company, not a primary objective.

I wish MBA programs taught this.

Over the past fifteen years, startups have been catalyzing global cultural changes that had previously been the realm of artists. Facebook is the perfect example, a company nominally driven by a desire to “change the way people interact”, a phrase that could just as easily be spoken by a conceptual artist. (…) One could argue that it’s all art, but the medium has shifted from canvas to Delaware C Corporations.

One, I think it’s a great thought, and very well put. I, and many other tech entrepreneurs that I know, are all motivated by this aspect of starting up. I just tend to think of it as “tweaking culture”, kind of in the same way that a 1950’s gearhead tweaked his engine.

Two, I love how unapologetically long-term Brad is thinking:

I don’t think this is a trend we’ll see culminate in the next 5 or even 10 years — this one is going to take thirty years to fully play out and the effects will be felt for decades if not centuries.

That’s the way my head works too. Don’t talk to me about 5 or 10 year impacts—how is the shit we’re doing affecting the future? How will my kids lives be different because of what we’re building?

This is why I go to work in the morning.

Having casually blogged for more than seven years now, my first thought was that Quora was a new model for content generation—pull. Traditional media is push—they tell you what they think you probably want to hear. Blogs are also push. Quora, however, is pull—people ask questions and wait for someone to tell them the answer. I as a publisher don’t have to sit around and wonder what people want to hear.

This could be a huge boon from a blogging perspective. Most small bloggers don’t have the time/resources/know-how to select topics that will get them the most traffic. Does that mean that Quora, or other services utilizing pull models, could potentially challenge push-based blogging?

I really don’t think so. At least not in the form we see currently.

• Blogs are personal identity tools as much as anything else, and your ability to depict your own personal identity is significantly limited in a world of strongly typed content. 
• Bloggers that really care about traffic also care about advertising revenue. And revenue is always maximized when you control the entire experience.
• Bloggers that don’t care that much about traffic (trust me, there are plenty of us) write primarily for ourselves. Do I hope that some people see what I’m writing? Sure, but I primarily select topics based on what I want to write about.

The entire question seems like somewhat of a straw man in retrospect, but I really did wonder at the outset we were observing an disruption of the blogging publishing model. What’s more interesting than the “no” answer above is what this thought exercise tells us about where the Q&A model could go in the future. 

Giving authors tools to manage their own identities and generate revenue will shift this equation. I’d love to see a Q&A service that allowed you to write questions and answers on your own property and provided aggregation.

“Nothing that is worth doing can be achieved in our lifetime; therefore, we must be saved by hope. … Nothing we do, however virtuous, can be accomplished alone; therefore, we are saved by love. No virtuous act is quite as virtuous from the standpoint of our friend or foe as it is from our standpoint. Therefore, we must be saved by the final form of love, which is forgiveness.”