As a Series B or Series C company there’s likely one thing on your mind that’s more important than anything else: growth.
We recently sat down with Tien Anh Nguyen who has just about seen it all when it comes to fast-growing companies.
Tien Anh spent nearly 8 years at OpenView Ventures Partners and then transitioned to UserTesting when they were a Series C company. He was the CFO when they raised Series D, E, and F for a total of $150M in equity funding. And then was the Chief Business Officer when they eventually went public in 2021.
So we asked him:
“What subscription metrics should a Series B or Series C B2B SaaS company obsess over to fuel growth?”
The one metric that matters most
No surprise here, but the first metric Tien Anh recommends obsessing over is ARR (or MRR) and the growth rate of that recurring revenue.
At the end of the day, this is the metric that is most important to move up and to the right. 🚀
But, your ARR doesn’t just magically grow on its own. You have to do a lot right operationally, and make the right strategic decisions. That means you need to look at other metrics that influence your ARR and its growth rate.
Next-level metrics to obsess over
Tien Anh recommends looking at both your Gross Retention and your Net Retention rates.
Gross Retention is the number of customers (or revenue) that remained with your business from the beginning of a period to the end. Net Retention is the amount of recurring revenue you obtained from existing customers in a period, including revenue increases from upsells. (For more on this topic please explore this blog post.)
Understanding your retention rates is important because it will help you:
- Understand the health of your business
- Model out what your ARR is likely to be in the future
Number of Subscription Customers (And Rate of Growth)
As a CFO of a Series B or Series C company it’s important to diversify your revenue base. That’s one of the main reasons Tien Anh recommends keeping a close eye on the number of subscription customers that you have (and how quickly that number is growing).
At this stage, you want a broader base of customers so that if you lose one then you won’t lose a significant percentage of your revenue. (For more on the topic of customer concentration risk, read this blog post.)
You might think that having a single $1,000,000 customer is just as good as having a hundred $10,000 customers, but Tien Anh thinks otherwise.
If you have a hundred $10,000 customers then some of them will likely grow to become million-dollar customers over time. Otherwise, you have to focus on continuing to grow your single million-dollar customer which is likely much more difficult.
Another reason to focus on this metric is that it easily demonstrates how well your team is doing at acquiring new customers which is crucial to your growth.
Sales Opp Conversion Rate
This metric looks at how well your sales team is converting opportunities into customers.
Tien Anh believes that your company can live or die based on this single metric. If you’re struggling to close customers at a healthy rate then you’re likely wasting precious time and money and it will be extremely challenging to grow your ARR. This is why it’s crucial that CFOs closely partner with the entire Go-To-Market team of Sales, Marketing, and Customer Success.
At this stage in your company’s journey, you have enough customers to have a significant measure of their happiness. Tien Anh recommends that you track this metric regularly so that you can look at trends over time that will serve as a conversation starter for your executive team. This metric is important for many reasons, but more than anything it will help you understand if customers are churning because they’re unhappy with the product.