Subscribed 2015: The CFO Summit

CFO Summit

WEDNESDAY May 20th, 2015

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.”

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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

CFOs 77

Finance Execs 130

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IPOs in 2014. or 55 of the IPOs were in Tech. of Tech were either Software or Internet/New Media.

263 20% 73%

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The Market loves these business models.

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So, what’s happening? #subscribed15

of companies believe their customers are switching to new consumption models.

4 / 5 83% 73%

84%

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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%

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“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

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Owning the new model.

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“…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

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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

“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

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“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

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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

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The new model is much more complex. #subscribed15

The old model

Build a widget. Sell the widget. Recognize your revenue.

simple.

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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

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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

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Executing against the business model requires an understanding of a whole new set of metrics.

Price. Find your sweet spot.Dynamically adjusting pricing and packaging is the

surest way to attract and retain customers, and

multiply the value of your relationships.

Collect. Get paid.Collect payments instantly through automated and

manual channels, while maximizing completed

transactions and minimizing write-offs.

Measure. No paper, no worries.Analytics make forecasting, accounting close and audits

a breeze. Plus, it gives you the right insight into your

subscribers, so you can make smarter decisions.

Acquire. Go get ‘em.Boost subscription rates with tools like flexible

pricing, promotions, integrated quoting and

multi-channel commerce.

Nurture. Build beautiful relationships.Keep your customers engaged and happy. Seamlessly

manage rapidly changing upgrades, conversions,

renewals and other orders.

Iterate. Try something new every day.Subscriptions can involve complex customer

relationships. Zuora lets you iterate and test

what’s working with just a couple of clicks.

Bill. Easy.Subscriptions mean more invoices and more

payments. Automatically generate fast, accurate

bills and deliver them online.

Account. Measure everything. Twice.Zuora plugs straight into your accounting software and

General Ledger. Register subscription transactions

and process deferred revenue with ease.

Scale. Get growing.Zuora is built on a secure, scalable technology

infrastructure. So wherever you start out, we’ll

keep the system running as you grow.

Price

Collect

Measure

Acquire

Nurture

Iterate

Bill

Account

Scale

SUCCESSCYCLE

The Metrics

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The Metrics




























Price

Collect

Measure

Acquire

Nurture

Iterate

Bill

Account

Scale

SUCCESSCYCLE

Growth Efficiency Index Cost to acquire customers in comparison to new ACV

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The Metrics




























Price

Collect

Measure

Acquire

Nurture

Iterate

Bill

Account

Scale

SUCCESSCYCLE

Retention Rate Lost ARR from customers

churning or downselling

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The Metrics




























Price

Collect

Measure

Acquire

Nurture

Iterate

Bill

Account

Scale

SUCCESSCYCLE

Recurring Profit Cost to service your customer

base and organization

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The Metrics




























Price

Collect

Measure

Acquire

Nurture

Iterate

Bill

Account

Scale

SUCCESSCYCLE

One-time Charges Any non-recurring revenue and costs (e.g. hardware / services)

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But there’s a problem…

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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.”

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It’s a completely new way of thinking…

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ARR GOVERNS ALL A R R n – Churn + A C V = A R R n + 1

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A R R n – Churn + A C V (+/- FX impact) = A R R n + 1

Even the simplest of formulas will evolve…

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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


OR

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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

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•  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

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The model interpreted…

COGS, G&A, R&D

50% Recurring

Profit Margin


BREAK EVEN

0%

100%

50%

ARR Non-Growth Expense

Growth Expense

BREAK EVEN INVEST IN FIELD & GROW FASTER


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.

“ “

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But how do you get the metrics…

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…and how do you operationalize across your company? #subscribed15

Winston Churchill

INTRO

However beautiful the strategy, you should occasionally look at the results.

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The Survey.

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100+ survey respondents

100+ survey questions

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10,000+ points of data

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The respondents.

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10%

60%

50%

40%

30%

20%

70%

80%

90%

100%

0%

34% 40%

90%

62%

> $50M in TTM Rev

> 200 employees

Software Recurring only

The framework.

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P A D R E

P P M

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Pipeline

•  How do you drive pipe •  How much do you need

•  Quality vs. Quantity

•  How long does it last

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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%

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16%

16%

18%

23%

27%

81-100%

41-60%

0-20% 21-40%

61-80%

PIPELINE: What comes from inbound?

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Thought Leadership drives pipeline

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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

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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

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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%

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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

Acquire

•  How do you model •  How do you compensate

•  How do you drive efficiency in your Sales Org?

•  Accelerate, digest or pull back #subscribed15

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

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ACQUIRE: How do you organize Sales team segmentation stack rank:

Industry Verticals 31%

Customer Rev 26%

# Employees 21%

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ACQUIRE: Bookings growth

29% < 20%

29% 20 – 60%

17% 60 – 100%

25% > 100% #subscribed15

ACQUIRE What percentage of your total sales opportunities close?

1-2% 3-5% 6-10% >10%

5%

37%

21%

36%

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ACQUIRE: How to model ramp

30 days 60 days 90 days > 4 mos

21% 24% 41%

14%

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ACQUIRE: How to model sales cycle

10 days 4%

30 days 16%

60 days 32%

120 days 29%

19%

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ACQUIRE: How to model quota attainment

> 40 %

12% 10%

40 – 60%

39%

60 – 80%

31%

80 – 100%

7%

> 100%

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ACQUIRE: What’s your overassign

$100M in quota on the street

35% >$90M EXPECT

36% $80-90M EXPECT

25% $70-80M EXPECT

2% $50-70M EXPECT

2% < $50M EXPECT

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ACQUIRE: What is OTE to quota?

16% < 150k

26% < 200k

35% < 250k

13% < 300k

10% > 300k

$1M

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ACQUIRE: What’s your quota based on?

19%

18%

48%

15%

MRR

TCV

ACV

Other

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ACQUIRE: What are your commission rates?

9% 5% 35% 6- 10% 37% 11 - 15% 12% 20%

CHEAPSKATES

THE NORM

THE NORM

BREAKING THE BANK

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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

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Deploy

•  Profit or break even

•  What KPIs should you hold the implementation team accountable to

•  Alignment between Sales Professional Services

•  When does subscription start

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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

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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

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RUN: Are your customers committed?

15% Monthly

4% Semi-Annual

73% 1-2 years

> 2 years 7%

Contract Terms

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RUN: Who owns renewals?

Customer Success,

55%

Sales, 33%

Other, 12%

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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

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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

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EXPAND

42%

51%

7%

Who Manages Upsells?

Customer Success Team

Sales Reps

Other

35%

65%

Do you pay for results?

no

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Conclusion

“As CFOs we have an opportunity and challenge. Own the business model and drive strategic decisions within our organizations.”

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Conclusion

“To be successful, we need information and collaboration. That is why we are here today.”

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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.”

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Thank you.