SaaS Housekeeping

A checklist for everything you should have in place

Photo by Eden Constantino on Unsplash

It’s amazing to me that SaaS businesses start to raise external funding without having the absolute basics in place. But whether you are planning on going for external funding or not, there are some key things you absolutely should have sorted. This is a checklist of sorts. And while its not exhaustive, if you don’t have everything here already, don’t beat yourself up, you’re not alone. But I would urge you to plug any gaps you see.

Metrics

My favourite topic (or at least one of them). You should at the very least be tracking on a monthly basis the following:

• Monthly Recurring Revenue

• Average Revenue Per User (ARPU)

• Growth (Month-on-Month, Quarter-on-Quarter and Year-on-Year)

• New Revenue (from new customers added in the last month)

• Gross Revenue Churn (how much revenue has disappeared from existing customers)

• Gross Expansion Revenue (how much revenue have your existing customers added)

• Net Revenue Retention (the net amount that your existing customers ended up contributing last month, which is a function of your MRR at the beginning of the month, plus expansion, minus churn)

• Customer Acquisition Costs (how much it cost you on average to win a new customer, calculated as total new revenue divided by total costs of sales and marketing)

• LTV:CAC ratio (Lifetime Value calculated as ARPU divided by churn rate)

Honestly, if you’re not doing this, I don’t know how you are doing anything but guessing at whether you’re doing a good job.

Financials

Might seem obvious, but not always adhered to:

• Budget in place, numbers tracked against it each month

• Accounting is on an accruals basis - especially important where you have annual subscriptions

• Revenue Forecasts for the next three years, calculated using assumptions pulled from the Metrics section . Otherwise, how does anyone know what you’re working towards?

• Cashflow forecasts.

The number one reason why SaaS businesses fail is that they run out of money. Sometimes this is unavoidable, but often it isn’t. We ran out of money after a few months post-launch because we hadn’t forecast properly and just put blind faith in the idea that we could market our way out of it.

Product and Engineering

Basic housekeeping should include:

• A 1- 3 year product roadmap. What are you working on now, what is coming up next and what is on the consideration list?

• Code Review. How do you do it? Who does it and how often?

• Systems Architecture: is it optimized? Are you confident it’s built for scale?

• Security: how is data protected? Do you have a disaster recovery plan (and not just a bullshit one that you put into proposals, but an actual one that you could action if the worst were to happen).

• Costs: do you have something in place to monitor and review costs? If AWS is a big part of your costs, for example, do you have any processes to make sure you’re not being inefficient and paying too much?

Security and scalability are probably the things that are going to come back and bite you hardest if you haven’t got them covered.

Go To Market

Are you happy with the following?:

• At least one person is responsible for the number of leads generated

• At least one person is responsible for new revenue targets

• You’ve identified your Ideal Customer Profile

• You’ve built up documentation around your Key Personas

• You’ve defined the Competitive Landscape and where you sit in it

• You understand your Differentiated Value and have a clear way to articulate that in your messaging

• You have defined what constitutes an MQL and an SQL

• You capture and track your sales pipeline and can report on its weighted value

• You have a strategy for, and you monitor and report on, the channels you are using to drive leads

• Your pricing is more than just a ‘finger in the air’ guess

• You have a clear on-boarding process for new customers

• You have a way to deal with customer queries and issues effectively (proportionate to the financial value of each customer)

• At least one person has responsibility for the revenue expansion/churn targets

In an attempt to get the product out there, GTM can be seen a bit like naval gazing. Why do you need to worry about documenting your ICPs when what you really need is sales? And I have some sympathy with this, but this ‘winging it’ approach will start to buckle very quickly as you scale. Why not get it in place now?

Operations and Legal

This is one whose requirements will become more complex as you grow, but at the very least you should have:

• Employment contracts in place that clearly assign IP to the company and include solicitation/non-compete where appropriate

• HR policies around leave, sickness, parental leave, flexible working, stock options (where applicable)

• An HR system in place

• An org chart for today and for 1,2, 3 years in the future. It’s really important that you don’t make up job titles on the fly because you’ll regret it when you have to bring in another layer or management as you scale. Don’t make someone the CMO when really they are a Marketing Manager, because at some point you may actually need a proper CMO and you’ve created a headache for yourself.

• Terms and Conditions that cover subscriptions and refunds, termination, IP and ownership. Be VERY wary of signing clients’ MSAs as they are often written for consultancies where the deliverable is owned by the customer and just cut and pasted by an in house lawyer who doesn’t understand SaaS.

• GDPR and CCPA Compliance: Ensure data handling practices comply with relevant privacy laws.

• Audit Trails: Maintain detailed audit logs for all critical operations and access events.

• Documentation for Compliance: Keep comprehensive records to demonstrate compliance during (future) audits.

• Third-party SaaS tools. I’ve witnessed situations where a company was paying for two SaaS tools that did the same thing. And who’s ever been in a situation where they realized they were paying for seats for employees that never used the tool or weren’t even working for the company anymore? Do you have a way of tracking and checking what is being used?

These feel really boring. I’m bored just looking at them. But they need to be done because if you leave it until you need it, then it’s probably too late.

Unintended Bonus

Getting these things in place is super important. And it’s much easier to do it when the company is smaller and less complicated than when you’re already generating reasonable amounts of revenue.

But there’s another little bonus beyond giving you the transparency and control you need. It will also make your life a lot simpler if you do decide to go for external funding. If you’re having conversations with VCs they’ll be asking many of these questions from the get-go. If you can pull out historical evidence that you’re all over it, then it’s going to be reassuring to them. And if you get to the point where you agree terms and the fun really starts, you’ll be thanking your younger self as you (relatively) effortlessly complete the Due Diligence stage of the fundraising journey.

And if you want any help with any of these… just shout!