1. SaaS METRIC OF THE WEEK: RULE OF 40: What is the 40% rule for SaaS companies? This video explains more but basically, when a VC-backed SaaS business (of over ~ $2m ARR) adds profit + growth rate, the total should be equal to 40% (or more). This helps calculate the cadence of a business: The faster they grow, the less profitable they need to be. Rule of 40 stocks have outperformed the broader indices, and IT benchmarks over the last 15 years.
2. ROAS vs. ROI: Which Metric Should You Use? First, let's define the differences; Return on ad spend (ROAS) is a metric used to measure the total revenue generated per advertising dollar spent. Return on investment (ROI), as applied to advertising, is the profit generated by the ads relative to the costs of the ads. Read more here on how to use each of the metrics effectively.
3. RENEWALS: Existing customers are the lifeblood of growth in a SaaS business, so making sure they renew is an exercise in revenue efficiency. New customer acquisition costs average about $1.10+ per $1 of ARR. Compare that to the cost of retaining or up-selling existing customers (about 12c-15c per $1ARR) - that's eight times cheaper. So take a peep at this article that lists 5 SaaS Renewal Best Practices and explains how best to calculate renewal rates.
4. BUYERS vs. USERS: The person writing you a check is not necessarily the same person getting value from your business. So read this insightful article from HeavyBit on differentiating messaging based on this premise and the different profiles.
5. HIRING: According to a recent Mulesoft/Salesforce report, 73% of Tech leaders said the current recruitment market is the hardest they've ever experienced for sourcing talent. Most (98%) say their organization suffers from a skills gap due to the "Great Resignation."
6. INFLUENCERS: A couple of years ago, I reported that Influencer marketing spend is projected to hit as high as $15 billion globally by 2022. Guess what? That number is now $16.4B. Why - as much as I don't like to hear this - across multiple forms of media, influencer ads spark a more significant emotional response and stick with users for longer than non-influencer ads.
7. FIGMA: In the newsletter a couple of weeks back, I discussed Figma. Adobe was probably paying attention because they acquired Figma late last week for $20 Billion. Yup, I said Billion, but that's not the most Bonkers metric because that $20 Bil is based on a 50X Multiple. Whoa! Is SaaS cool again? Welllllllll......maybe not.
8. VENTURE: In line with the Figma multiple above, Mark Suster thinks that SaaS companies should not trade at a 24x multiple as they did in November 2021. His perspective is that 10x (May 2022) seems more in line with a new long-term normal.
9. UBER: There was a big-time breach last week, and by big time, I mean all of it. From AWS to Slack and their internal systems. All apparently by an 18-year-old. I don't think we know how actually screwed they are yet.
10. CASE STUDY: Craigslist. If you haven't been on Craigslist for a while, don't worry. It still looks the same. 25+ years of the same-same. Here's why.
POD OF THE WEEK: Learn Fast, don't Fail fast - this is a great podcast covering the Myths about Failure from Greylock Partners (and Reid Hoffman)