SaaS Revenue Primer

SaaS Revenue Primer
Flux Analysis
January 2009
DevelopmentCorporate
www.developmentcorporate.com
Overview & Contents
The traditional approaches to technology revenue

analysis are different for SaaS solutions. This
presentation covers one of several techniques that
executives and investors should use to assess the
relative health of SaaS revenues
Contents

SaaS Revenue Primer

SaaS Revenue Flux Analysis

Other SaaS Revenue Analysis Topics
Copyright 2009 Development Corporate www.developmentcorporate.com
SaaS Revenue Primer
•
Fundamentally different than traditional
licensed software / maintenance /
professional services economic model
•
Techniques for forecasting, analyzing,
and assessing SaaS product line
performance are different
•
New analytical approaches are needed
to get underneath the SaaS iceberg
•
This is first of a multi-part presentation
on SaaS Revenue Analysis
SaaS Revenue Components
•
License, maintenance, and PSO fees replaced with:
•
User fees – monthly $ / per user or seat
•
Usage fees – cost per transaction / activity (often sold in bundles)
•
Setup/ Customization fees (generally one time)
•
‘Junk’ fees (archiving, private labeling, special connectivity, etc.)
Take Away: Understand the Components and Structure of SaaS Revenue Stream
Flux Analysis
•
Typical SaaS monthly revenue analysis
•
Top 10 customers showing strong growth (50%+ YoY)
•
Rest of customers driving 20% of total growth
•
Total SaaS Service Line growing 8%+
•
On the surface, all looks good
Flux Analysis
•
Understanding changes in SaaS revenue streams is critical
•
Always compare to another period (last month, last year, etc.)
Flux ‘categories’ are key:

•
How many new customers & how much revenue did they contribute?
•
How many customers quit/attritted & how much revenue did they contribute?
•
How many existing customers grew revenue & how much revenue did they contribute?
•
How many existing customers had flat revenues
•
How many customers had declining revenues & how much revenue did they contribute?
Flux Analysis Example
Flux Analysis Interpretation
•
Two major components:
•
Top 10 analysis
•
Flux category analysis
•
Provides real insight into SaaS
product line behavior
•
In this example, you can see:
•
The two top 10 new customers (#1 & #2) were responsible for the majority of
the month’s revenue growth
•
Customer #3 and #10 has huge growth – what was responsible for it?
•
Why did Customer #8 attrit? And what is going on with #7
•
Customers who grew revenue year over year and new customers drove the
year over year change and covered the attritions and revenue declines
•
The customer count change showed that a net 483 left the business – is this
a key trend for the future?
How Do You Implement Flux Analysis?
•
Simple Excel-based analysis
•
Extract data from current systems
•
Assemble base data
•
Customer identifier, customer name, SaaS product name, period #1
revenues, period #2 revenues
•
Calculate period over period changes
•
Classify into flux categories: new, attritted, existing growth, existing
flat, existing decline
•
Use pivot tables to summarize tables and generate charts
Other SaaS Revenue Analysis Topics
Here are some other topics that will be covered in this series:
•
Customer Tiering Analysis
•
How to segment/profile SaaS customers into significant tiers
•
Pricing Analysis
•
Not all customers pay the same price. What customers are paying
what rates and how does it relate to their tier / flux behavior
•
MoneyWheel Analysis
•
What are the repeatable sales transactions exist in your current
as well as prospective customer base?
DevelopmentCorporate is a strategic corporate
development advisory firm for enterprise and mid-
market technology companies. We assist
management teams, board of directors, and investors
in updating their merger, acquisition, and divestiture
strategies and then we provide tactical support for the
implementation of those strategies. We also provide
support for strategic initiatives such market
assessments, competitive intelligence updates,
product/service portfolio analysis, etc. Finally, we
have significant experience in guiding large scale
organizations through corporate restructurings to
either take advantage of new market opportunities or
respond to changes in market conditions.
www.developmentcorporate.com

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The traditional approaches to technology revenue

Flux ‘categories’ are key:

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