Subscribed 2015: The CFO Summit
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The CFO Summit at Subscribed 2015 was an exclusive half day event bringing together modern CFOs from some of the hottest businesses in the world. Through an intimate and highly interactive forum, they discussed the likes of market trends, operational benchmarks and how other CFOs are transforming their businesses through their evolving strategic leadership role.
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Subscribed 2015: The CFO Summit
- 2. Summit Intro “Share data, unblemished and unbiased, in an effort to provide transparency and define best practices, but also create a network for ongoing collaboration that lives on long past this afternoon.” #subscribed15
- 3. Today 1: 30 – 2:30 Metrics + Trends for 2015: Unveiling the Survey Zuora | Pivotal 2:45 – 3:30 The Path to IPO: The CFO’s Perspective Zuora | Box | Zendesk | Hubspot 3:45 – 4:30 How Wall Street Values Subscription Businesses Cannacord | KPMG 4:30– 5:00 Closing Remarks + Libations #subscribed15
- 5. IPOs in 2014. or 55 of the IPOs were in Tech. of Tech were either Software or Internet/New Media. 263 20% 73% #subscribed15
- 7. The Market loves these business models. #subscribed15
- 9. of companies believe their customers are switching to new consumption models. 4 / 5 83% 73% 84% #subscribed15
- 10. Businesses are Responding US 13%28% AU 24%43% UK 25%23% Over half of companies are in the process of changing or have changed the way they price and deliver their goods and services. 51% #subscribed15
- 11. “Innovation is the hottest word in business… …but most of the discussion centers around products and services. The more profound challenge for most companies now is imagining a new business model, a new answer to the fundamental question, how do we make money?” - Fortune Magazine #subscribed15
- 13. “…vast majority (81%) felt they worked at companies that viewed their finance operation as a ‘strategic business partner,’ involving the CFO in top-level decision making as never before…” - Fortune Magazine #subscribed15
- 14. 10%0% 5% 15% 20% 25% 30% 35% 40% 38% 26% Traditional tasks 19% 20% Directly assisting the board/audit committee 18% 24% Business strategy and other commercial work 15% 16% Market and shareholder information 10% 14% Enhancing the efficiency of the finance function Current 3 years time How CFOs are allocating their tasks… …today and tomorrow. Survey
- 15. “There’s been an evolution in America in terms of the CFO. The CFO is increasingly being called upon to weigh in on much more strategic decisions involving the company, including everything from transactions to providing assessments of emerging markets and analyses that go far beyond looking at the books and determining whether there will be enough cash to support investment.” - Fortune Magazine #subscribed15
- 16. “CFOs’ responsibilities go well beyond finance into balancing compliance and risk management with business-performance goals. They have an important role to play in reading and understanding evolving business drivers and helping their companies seize opportunities. CFOs now spend more time on strategy and operating issues and less on budgeting and accounting.” - Business Week #subscribed15
- 17. o b s o l e t e . Your business model is everything you think you know Assume this: doesn’t work anymore. about staying competitive #subscribed15
- 18. The new model is much more complex. #subscribed15
- 19. The old model Build a widget. Sell the widget. Recognize your revenue. simple. #subscribed15
- 20. The new model Build a widget. Recognize your revenue. complex. Sell the widget. Acquire customers & monetize relationships. free trial paid subscriptions add on upgrade renewal #subscribed15
- 21. The new model Build a widget. Recognize your revenue. complex. Sell the widget. Acquire customers & monetize relationships. free trial paid subscriptions add on upgrade renewal #subscribed15
- 22. Executing against the business model requires an understanding of a whole new set of metrics.
- 23. no worries. ting close and audits ht insight into your marter decisions. ew every day. mplex customer terate and test uple of clicks. wing. Price Collect Measure Acquire Nurture Iterate Bill Account Scale SUCCESS CYCLE The Metrics #subscribed15
- 24. The Metrics no worries. ting close and audits ht insight into your marter decisions. ew every day. mplex customer terate and test uple of clicks. wing. Price Collect Measure Acquire Nurture Iterate Bill Account Scale SUCCESS CYCLE Growth Efficiency Index Cost to acquire customers in comparison to new ACV #subscribed15
- 25. The Metrics no worries. ting close and audits ht insight into your marter decisions. ew every day. mplex customer terate and test uple of clicks. wing. Price Collect Measure Acquire Nurture Iterate Bill Account Scale SUCCESS CYCLE Retention Rate Lost ARR from customers churning or downselling #subscribed15
- 26. The Metrics no worries. ting close and audits ht insight into your marter decisions. ew every day. mplex customer terate and test uple of clicks. wing. Price Collect Measure Acquire Nurture Iterate Bill Account Scale SUCCESS CYCLE Recurring Profit Cost to service your customer base and organization #subscribed15
- 27. The Metrics no worries. ting close and audits ht insight into your marter decisions. ew every day. mplex customer terate and test uple of clicks. wing. Price Collect Measure Acquire Nurture Iterate Bill Account Scale SUCCESS CYCLE One-time Charges Any non-recurring revenue and costs (e.g. hardware / services) #subscribed15
- 29. THIS DOESN’T MEAN WE HAVE A HALL PASS. THERE STILL NEEDS TO BE AN OWNER. “The benchmark for these metrics don’t exist in the public domain. They are not GAAP.” #subscribed15
- 30. It’s a completely new way of thinking… #subscribed15
- 31. ARR GOVERNS ALL A R R n – Churn + A C V = A R R n + 1 #subscribed15
- 32. A R R n – Churn + A C V (+/- FX impact) = A R R n + 1 Even the simplest of formulas will evolve… #subscribed15
- 33. The model… COGS, G&A, R&D 50% Recurring Profit Margin Sales, Marketing, Customer Success BREAK EVEN 0% 100% 50% ARR Non-Growth Expense Growth Expense BREAK EVEN INVEST IN FIELD & GROW FASTER Sales, Marketing, Customer Success OR #subscribed15
- 34. Growth is best measured by GEI. $100M Growth Exp. 1.5 GEI = $65M ARR Growth Therefore, if GEI is 1.5 and $100M is spent on growth: Growth Expense ARR Growth = Growth Efficiency Index (GEI) Growth Expense GEI =ARR Growth #subscribed15
- 35. • incurred to maximize ACV • traditionally sales & marketing efforts • sometimes customer success • incurred to support the organization • traditionally COGs, R&D, admin functions GROWTH SPEND NON-GROWTH SPEND #subscribed15
- 36. The model interpreted… COGS, G&A, R&D 50% Recurring Profit Margin Sales, Marketing, Customer Success BREAK EVEN 0% 100% 50% ARR Non-Growth Expense Growth Expense BREAK EVEN INVEST IN FIELD & GROW FASTER Sales, Marketing, Customer Success OR With a GEI of 1.0 and churn at 15%, you’ll have 35% growth while maintaining break even. But only if deals are collected upfront and you’re cash flow positive. But, if your GEI is 2.0 you’re growth will slow to 10% to break event. “ “ #subscribed15
- 37. But how do you get the metrics… #subscribed15
- 38. …and how do you operationalize across your company? #subscribed15
- 39. Winston Churchill INTRO However beautiful the strategy, you should occasionally look at the results. #subscribed15
- 44. 10% 60% 50% 40% 30% 20% 70% 80% 90% 100% 0% 34% 40% 90% 62% > $50M in TTM Rev > 200 employees Software Recurring only
- 46. P A D R E P P M #subscribed15
- 47. Pipeline • How do you drive pipe • How much do you need • Quality vs. Quantity • How long does it last #subscribed15
- 48. PIPELINE: What does your funnel look like? Of those, 76% clarified that as ORGANIC (website, free trials) INBOUND is the largest individual source of pipe (46% listed as primary source) 40% Investing in your website pays off – more than 40% of website visits were unique for majority of respondents 46% 76% #subscribed15
- 49. 16% 16% 18% 23% 27% 81-100% 41-60% 0-20%21-40% 61-80% PIPELINE: What comes from inbound? #subscribed15
- 51. web visits IB leads new S1 pipeline S2 accepted bookings ratios total to unique web to IB leads IB lead to IB opp S1 to S2 win ration % % % % % % % PIPELINE: Report on what the funnel looks like #subscribed15
- 52. Pipe Score w/ Targets IBLeads MQLs #New opps $ New Opps IB lead to S1 Conv Rate IB Leads MQLs # New Opps $ New Opps IB Lead to S1 Conv Rate Inbound Organic Inbound Paid Events / Other Outbound AE TOTAL QTD Actuals Plan PIPELINE: Expose, communicate, align #subscribed15
- 53. PIPELINE: Coverage 1.0x-2.0x 2.1x-3.0x 3.1x-4.0x 4.1x-5.0x >5.0x 12% 47% 24% 10% 7% #subscribed15
- 54. New Pipe Creation Workable Pipe (Current QTR) Workable Pipe (Nextt QTR) Pipe Score w/ Targets New Opps (S!) New Opps (S1) Accept Opps (S2) Accept Opps (S2) Acceptance Rate Quota Workable Opps (S1-8) Workable Coverage Quota Workable Opps (S1-8) Workable Coverage Northwest Northwest Northwest Northwest NoAM Enterprise EMEA APAC ROW total West East Commercial Total ZBR / Other Total Previous Week Total Previous QTR Total WoW Delta PIPELINE: Transition to acquire
- 55. Acquire • How do you model • How do you compensate • How do you drive efficiency in your Sales Org? • Accelerate, digest or pull back #subscribed15
- 56. 77%of respondents sell primarily through a direct sales approach 52%use a self service model 65%offer their prospects a free trial period 20%However, only 47% said less than 20% convert from free trial to customer ACQUIRE: Selling Approach #subscribed15
- 57. ACQUIRE: How do you organize Sales team segmentation stack rank: Industry Verticals31% Customer Rev26% # Employees21% #subscribed15
- 58. ACQUIRE: Bookings growth 29% < 20% 29% 20 – 60% 17% 60 – 100% 25% > 100% #subscribed15
- 59. ACQUIRE What percentage of your total sales opportunities close? 1-2% 3-5% 6-10% >10% 5% 37% 21% 36% #subscribed15
- 60. ACQUIRE: How to model ramp 30 days 60 days 90 days > 4 mos 21% 24% 41% 14% #subscribed15
- 61. ACQUIRE: How to model sales cycle 10 days4% 30 days16% 60 days32% 120 days29% 19% #subscribed15
- 62. ACQUIRE: How to model quota attainment > 40 % 12% 10% 40 – 60% 39% 60 – 80% 31% 80 – 100% 7% > 100% #subscribed15
- 63. ACQUIRE: What’s your overassign $100M in quota on the street 35% >$90MEXPECT 36% $80-90MEXPECT 25% $70-80MEXPECT 2% $50-70MEXPECT 2% < $50MEXPECT #subscribed15
- 64. ACQUIRE: What is OTE to quota? 16% < 150k 26% < 200k 35% < 250k 13% < 300k 10% > 300k $1M #subscribed15
- 65. ACQUIRE: What’s your quota based on? 19% 18% 48% 15% MRR TCV ACV Other #subscribed15
- 66. ACQUIRE: What are your commission rates? 9% 5% 35% 6- 10% 37% 11 - 15% 12% 20% CHEAPSKATES THE NORM THE NORM BREAKING THE BANK #subscribed15 RATESRESPONSES
- 67. ACQUIRE: Expose, communicate, align Current Qtr (Current Week) Current Week Capacity Corporate Street Closed #Deals $ACV RVP / AVP Commit Best Case Technical Buy Off # Deals $ACV In Contracts # Deals $ACV #subscribed15
- 68. Deploy • Profit or break even • What KPIs should you hold the implementation team accountable to • Alignment between Sales Professional Services • When does subscription start #subscribed15
- 69. DEPLOY Have an implementation component to their solution Charge less than 10% of initial year ACV for the implementation 75% commence the subscription on contract signing Of customers go live within 30 days of contract signing #subscribed15
- 70. Run • Churn is the Achilles heel of any subscription business • Who owns renewals • Support versus customer success • SLAs and uptime commitments • How does a company learn from service tickets #subscribed15
- 71. RUN: Are your customers committed? 15%Monthly 4%Semi-Annual 73%1-2 years > 2 years 7% Contract Terms #subscribed15
- 72. RUN: Who owns renewals? Customer Success, 55% Sales, 33% Other, 12% #subscribed15
- 73. Expand • Who owns the upsell • Sales efficiency depends on farming the existing base • New usage, new divisions, new products…can all be leveraged as upsell strategy #subscribed15
- 74. EXPAND Upsells are important – over 40% 20% >60% 14% of respondents generate more than of their bookings from upsells of companies are changing pricing At least annually Only every 3 years Sales reps are the key – companies generating higher upsells assign reps to manage #subscribed15
- 75. EXPAND 42% 51% 7% Who Manages Upsells? Customer Success Team Sales Reps Other 35% 65% Do you pay for results? no #subscribed15
- 76. Conclusion “As CFOs we have an opportunity and challenge. Own the business model and drive strategic decisions within our organizations.” #subscribed15
- 77. Conclusion “To be successful, we need information and collaboration. That is why we are here today.” #subscribed15
- 78. Conclusion “Let’s make it interactive and informational. Have a goal of exiting with at least five new CFO contacts you can collaborate with post summit.” #subscribed15
- 79. Thank you.