Nov 10, 2019
CFOTL: What are your top of mind metrics?
Karnes: I think about metrics sort of under three rubrics. The
first is what I would think of as a customer-centric layer. Then
there's the financial performance one that we all think about as
CFOs, and then there's a very distinct operational layer. On the
customer-centric layer, we think about things like SLAs, our
service-level agreements with our customers, uptime, system
availability. These are the things--before we get to gross
margin--that really impact our success as a business and what our
next quarter is going to be like. There are things like customer
health scoring in your customer success organization. Happy
customers don't leave. Keeping your revenue is much cheaper than
trying to go acquire new revenue. Things like NPS, net promoter
score. Things that I watch very, very carefully are very
customer-centric, as opposed to what's next, which is more pure
financial performance.
At the end of the day, your economics are based on your base
business, your new business, and the investments that you make
going forward. That's what drives economic performance. The first
thing that I look at in the morning is churn and retention.
"Churn," for those who aren't SaaS experts, is simply our
subscriptions that are terminating and my customers that are
leaving me or deciding to subscribe to me in a lesser amount. So,
it's lost revenue. After that, it's gross margin. Obviously revenue
is tops. Churn is my top line. Gross margin is after my cost of
goods sold and tells me how efficiently I'm delivering my product.
All of these businesses are built on free cash flow. After I pay my
G&A, after I pay the capex that I've got, how much cash am I
making and am I self-sufficient or dependent on the equity markets
to grow my business? That's a really important part of the
business, from a baseline.
New business cost is very important. These are things like customer
acquisition costs. I'm making an investment for every customer. How
quickly do I get that investment back? How many months? Is it six,
12, 18 months before I recoup that investment? And, like all good
SaaSware companies, we invest a tremendous amount of money in our
future through research and development. The question is, What is
the rate of return that we're engineering to for that research and
development? How does this correlate with other opportunities that
we may have, like acquisitions or debt repayment?