Once you’ve found product/market fit, scaling a SaaS business is all about honing go-to-market efficiency.
Many extremely helpful metrics and analytics have been developed to provide instrumentation for this journey: LTV (lifetime value of a customer), CAC (customer acquisition cost), Magic Number and SaaS Quick Ratio are all very valuable tools. But the challenge in using derived metrics such as these is that there are often many assumptions, simplifications and sampling choices that need to go into these calculations, thus leaving the door open to skewed results.
For example, when your company has only been selling for a year or two, it is extremely hard to know your true lifetime customer value. For starters, how do you know the right length of a “lifetime?”
Taking one divided by your annual dollar churn rate is quite imperfect, especially if all or most of your customers have not yet reached their first renewal decision. How much account expansion is reasonable to assume if you only have limited evidence?
LTV is most helpful if based on gross margin, not revenue, but gross margins are often skewed initially. When there are only a few customers to service, cost of goods sold (COGS) can appear artificially low because the true costs to serve have not yet been tracked as distinct cost centers as most of your team members wear multiple hats and pitch in ad hoc.
Likewise, metrics derived from sales and marketing costs, such as CAC and Magic Number, can also require many subjective assumptions. When it’s just founders selling, how much of their time and overhead do you put into sales costs? Did you include all sales-related travel, event marketing and PR costs? I can’t tell you the number of times entrepreneurs have touted having a near-zero CAC when they are just starting out and have only handfuls of customers — which were mostly sold by the founder or are “friendly” relationships.
Even if you think you have nearly zero CAC today, you should expect dramatically rising sales costs once professional sellers, marketers, managers, and programs are put in place as you scale.
One alternative to using derived metrics is to examine raw data, which is less prone to assumptions and subjectivity. The problem is how to do this efficiently and without losing the forest for the trees. The best tool I have encountered for measuring sales efficiency is called the 4×2 (that’s “four by two”) which I credit to Steve Walske, one of the master strategists of software sales, and the former CEO of PTC, a company renowned for its sales effectiveness and sales culture. [Here’s a podcast I did with Steve on How to Build a Sales Team.]
The 4×2 is a color-coded chart where each row is an individual seller on your team and the columns are their quarterly performance shown as dollars sold. [See a 4×2 chart example below].
Sales are usually measured as net new ARR, which includes new accounts and existing account expansions net of contraction, but you can also use new TCV (total contract value), depending on which number your team most focuses. In addition to sales dollars, the percentage of quarterly quota attainment is shown. The name 4×2 comes from the time frame shown: trailing four quarters, the current quarter, and the next quarter.
Color-coding the cells turns this tool from a dense table of numbers into a powerful data visualization. Thresholds for the heatmap can be determined according to your own needs and culture. For example, green can be 80% of quota attainment or above, yellow can be 60% to 79% of quota, and red can be anything below 60%.
Examining individual seller performance in every board meeting or deck is a terrific way to quickly answer many important questions, especially early on as you try to figure out your true position on the Sales Learning Curve. Publishing such leaderboards for your Board to see also tends to motivate your sales people, who are usually highly competitive and appreciate public recognition for a job well done, and likewise loathe to fall short of their targets in a public setting.
Some questions the 4×2 can answer:
Overall performance and quota targets
How are you doing against your sales plan? Lots of red is obviously bad, while lots of green is good. But all green may mean that quotas are being set too low. Raising quotas even by a small increment for each seller quickly compounds to yield big difference as you scale, so having evidence to help you adjust your targets can be powerful. A reasonable assumption would be annual quota for a given rep set at 4 to 5 times their on-target earnings potential.
The Real Reason The US Cancelled This Multi-Billion Dollar Helicopter Project
Prior to UAVs like the MQ-1 Predator and MQ-9 Reaper capturing the public’s attention during the War on Terror, stealth aircraft were all the rage. Aircraft like the B2 Spirit showed the potential for stealth attack aircraft. The RAH-66 Comanche was supposed to follow that same trend.
The Comanche was a joint venture by Sikorsky and Boeing and was originally intended to act as a reconnaissance aircraft and pinpoint targets of interest, according to Boeing.
Looking like a PlayStation One render of a helicopter, the Comanche was designed to operate stealthily. Its angular body panels allowed it to fly into enemy territory virtually undetected. The Comanche was not designed to be a flying weapons platform like the AH-64 Apache, but it wasn’t a slouch either. It boasted a 20mm chin gun and the wing pylons could be equipped with air-to-air or air-to-ground missiles (via Hotcars).
With nearly 20 years of hindsight, it’s easy to see why the military favored drones over the stealth wizardry of the Comanche. But back then, a stealth helicopter was the future of warfare.
American Airlines New Supersonic Jets Could Slash Flight Times In Half
Being built to travel at Mach 1.7, or about 1,304 miles per hour (when traveling over water), the Overture would get passengers to their destinations much faster than the average commercial flight. Though one of its primary trade-offs is capacity, as Boom says the jet can only manage between 65 to 80 passengers at a time. That’s roughly half of the commonly-used Airbus A320’s 140 to 170 passenger capacity or the 149 to 220 maximum seating of the Boeing 737 series. Though on paper the Overture does boast more range — up to 4,250 nautical miles — than either of its mass transit contemporaries.
A ride in an Overture aircraft should also be just as safe as today’s typical flights, with Boom on the hook to make sure the new plane meets the current industry standards. Additionally, the new models will also have to meet American’s own requirements even before it delivers its first plane.
If all goes according to plan, Boom should begin rolling out manufactured Overtures sometime in 2025. It expects to start carrying passengers by 2029. So far nothing has been said about the availability of Overture flights to American Airline customers once it has the planes in hand, nor anything about ticket pricing.
The 5 Best Ways To Celebrate May The 4th: Star Wars Day
While you’re perfectly welcome to head to your local LEGO retailer to pick up a set and snap it together, we’ve got another bit of a treat for you. Straight from yesterday’s Toys-R-Us “May The 4th Be With You” Star Wars LEGO event, here are the directions to the Wookie Gunship mini-build.
Above you’ll see the first half of the directions, below you’ll see the second. These pieces should be relatively easy to find – supposing you’ve got stacks of LEGO blocks handy to build with.
These sets weren’t sold – they were given away to the tiniest and newest fans of Star Wars, the kids! The next generation!
Below you’ll see a gallery provided by Toys-R-Us of the Star Wars event held at (most) Toys-R-Us locations across the United States.
Celebrate along with us by sharing your Star Wars Day experience right now!
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