Tuesday, December 01, 2009

Cloudonomics and 2010 Planning for your SaaS and Cloud Computing business

As we get close to the end of the year, I thought it would be interesting to put together a post on how to approach the 2010 planning. I was fortunate to be invited to present at Dreamforce a few weeks ago to tackle this topic on stage, so if you want more color, fell free to watch the video below, but here is a quick summary:

1) Be more than ever metrics driven: as we get into a period of recovery, but with still a lot of uncertainty, it is critical to base your plan around the 6 C's of Cloud Finance (CMRR, Cash, Churn, CAC ratio, CLTV and CMRR Pipeline):

  • Make sure than your CMRR (Committed Monthly Recurring Revenue) line will cross your MRE (monthly recurring expenses)

  • Calculate your CAC ratio in the past quarters to see if it is capital efficient to spend more in S&M in 2010

  • Focus on customer retention and make sure you allocate enough resources to your account management and product team

  • Measure you CMRR Pipeline carefully: this is the only metric giving you forward visibility onto the future performance of your business (see slide 18 for more details)

2) Manage your cash carefully but don't underinvest: capital is available but your metrics will tell you if you can raise outside capital or not in good terms

3) Watch for cheap revenue: you may be able to buy failing competitors for their customer base or interesting technology at a very interesting price. The recession created opportunities!

You can download the PDF by clicking here

To help you build and assess your plan, I thought you might also be interested in this recent benchmarking of public SaaS companies that Steve Klei, a veteran SaaS CFO put together (Click on the picture to see the full slide show) :

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