The 2010 Private SaaS Vendors Benchmarking Report breaks out comprehensive financial and operating benchmarks for private SaaS vendors with 2009 revenues under $10M and between $10M & $50M. With 150 detailed benchmarks, the Private SaaS Benchmarking Report covers critical operating measures such as CMRR (contracted monthly recurring revenues) for the last month of the fiscal year, net new customers, customer acquisition costs, customer maintenance costs, average deal sizes, customer renewal rates by number of customers and by dollar rate of renewal, as well as hosting expenses.

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The BridgeGroup recently surveyed 115 North American technology companies with a special focus on SaaS inside sales metrics and sales compensation for SaaS companies. The report covers SaaS benchmarks like organization size, average sale price, quotas and comp, hunting vs. farming, trial conversion, and even calls per day. The report is free, but does require registration.

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This SaaS Metrics blog post looks at the high level goals of a SaaS business and drills down layer by layer to expose the key metrics that will help drive success. The post provides a considerable amount of detailed information that should be of great assistance to anyone running, or looking start, a SaaS business.

Metrics for metric’s sake are not very useful, so the goal of the post is to provide a detailed look at what management must focus on to drive a successful SaaS business. For each metric, the post also looks at what is actionable.

The post starts by looking at the high level goals of a SaaS business: Profitability, Cash, Growth and Market Share, and drills down into the component parts that drive each of these. Key metrics that are covered include cost of customer acquisition (CAC), lifetime value of the customer (LTV), months to recover CAC, Churn, sales funnel metrics, etc.

The coverage of what metrics are needed is comprehensive and detailed.

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This discussion comes up time and time again in the eternal SaaS vs On-Premises debate. The SaaS guys (yup, that’s me) wax eloquently about all the advantages of SaaS only to have the On-Prem guys shoot us down by proclaiming SaaS companies aren’t real businesses because they can’t make a profit. The thing is, it just ain’t so.

The latest bout of this I had was amongst my Enterprise Irregulars blogging group, and comes in the aftermath of Sapphire (SAP’s User Conference), which always brings out a lot of discussions like this. Our discussion got started through Michael Krigsman’s excellent post on SAP’s continued commitment to their SaaS product, Business by Design. As Michael points out:

The economic differences between delivering software via SaaS and on-premise methods are substantial, with profound implications for how software companies optimize internal operations.

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In the emerging sector of Software as a Service, one of the biggest challenges for many of the top CEOs is the lack of successful role-model businesses. There are still only a handful of public pure-play SaaS businesses, and thus the body of “best practices” is very limited. Ironically, on top of this, one of the hardest things veteran software CEOs have to do when they start to run a SaaS company is to forget much of what they know about running a software company.

As we worked with our SaaS portfolio companies, it became apparent that savvy SaaS companies were following a new set of rules – most of which didn’t apply in the traditional software world, and many of which they were making up in real-time. We then set out to capture the new “best practices” of the on-demand model.

To pull these insights together, Bessemer studied over a hundred SaaS companies – both pure-plays and hybrids – and recently hosted an invitation- only SaaS CEO Summit to compare perspectives and discuss the findings. Many of the insights gained during this research and these discussions are condensed into the following list of ten new “laws” which help to govern the success of SaaS companies.

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Josh James, CEO of Omniture (a Hummer Winblad portfolio company), gave an inspiring talk on building a SaaS company last week at the Opsource summit….

The key metric that Omniture used to decide how much gas to pour on the fire was the Magic Number.

The Magic Number

The magic number (“MN”) is a metric that can be used to tell you the health of your company from the perspective of growing monthly recurring revenue (“MRR”). It is a common mode metric to compare companies MRR scaled by sales and marketing spend. The MN provides insight into the effectiveness of previous quarter Sales and Marketing spend on MRR growth. Your MN will be penalized if the spend is wasted (bad marketing, bad sales execution), if your churn is high or if the market has issues (saturation, competitive forces). It also has a very high correlation with Q/Q growth rates so in general, high Magic Numbers are good.

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Looking to build a business plan for your SaaS company, but don’t know how to create the right financial model?

Get best practices and insider tips first-hand from SaaS finance experts and actual investors on what financial metrics matter and how they affect your business plan, ability to raise capital, and long-term profitability.

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Presentation from 2008 SaaS Summit that covers Omnitures stages of evolution and introduces the “SaaS Magic Number”

Omniture Stages of Evolution: Product – Sell like crazy; Prove you can sell; – Build team; QBSRs – Retain; QBSRs – Marketing; QBSRs – Efficiency of Hardware; QBSRs – More Engineers and more QBSRs – Most Important Investment Metric – “Magic Number”

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