The most important gauge of the health of a software as a service operation is how involved customers are with products, says a CFO who's taken half a dozen startups to a successful exit.
Companies must be satisfied with a business' services because a SaaS business relies on customers renewing services over time and generating steady growth in annual recurring revenue (ARR), Marty Meyer, CFO of GAN Integrity, said in a CFO Thought Leader podcast released last week. Gan Integrity is a SaaS platform that helps companies comply with laws as well as their own business and ethics standards.
"That base of repeatable, predictable revenue is what investors love about SaaS, so it really drives the focus on customer success," said Meyer, who started at GAN this summer. "So, it's important to keep the customers you have happy, keep them growing, expanding and spending more with you."
Customer health metric
Meyer said he's come up with what he calls a holistic health score of companies he considers ideal users of his company's products.
"You might have five or six modules, or products," said Meyer. "Are your customers using one or six of them? If they bought them, are they using them? What does their payment history look like? How many support tickets are they generating? That starts to really inform you about your customers and whether they are truly happy or not."
To keep customers happy, he said, you have to think about their experience with your products from their first interaction, and that requires the CFO to design metrics that can draw that information out and be shared with relevant teams.
"How long is [new-customer implementation] taking and what kind of tasks are we doing?" he said. "That implementation process is really the first interaction [they're] having . . . so we want to make a great impression on them, start that relationship off on a good note."
It might make sense to spend resources writing new code to speed up new-customer implementation as a way to improve a customer's first experience, he said.
"Do you do new roadmap items — new functionality — or do you try to make things more efficient or easier to use for your customer base?" Meyer said. "That's always a balancing act but we're trying to make sure we focus on that balance and [send] back information, like, 'Hey, if we make a change, it might take us a couple of weeks to do the coding, but once we do this, we can cut the implementation time for our customers in half.'"
Meyer launched his career 25 years ago as a software engineer at Xedia Corporation, a developer of access routers, and went back to school at night for an MBA because of an interest in the entrepreneurial side of business.
From there he joined a number of tech startups as finance chief and helped lead the sale of half a dozen of them to larger strategic tech companies, including IBM, Motorola, and Alcatel Lucent.
Custom P&Ls for decision-making
Over the years he's developed the practice of working with other company executives to design a kind of P&L for them so they can calibrate their resources to improve customers' experience.
"In a few companies I've been with, the implementation teams, the customer success teams . . . are just trying to get customers on board as fast as they can," he said. "At some point I've sat down with the VPs of professional services teams and helped them think through defining financial metrics to use to run their part of the business."
Team leaders find the custom P&Ls he creates empowering because it gives them hard data on which to make decisions. "When's the right time to request additional resources or potentially ramp up in front of new customers or request changes from the development teams to make implementation more efficient?" he asked.
From an entrepreneurial perspective, this kind of custom metric designing has made his jump from engineer to CFO satisfying, he suggested.
"The ability to transform the way teams think about their success, to me, is the game changer of what a good finance leader can bring to the table," he said.