SaaS in Five Minutes

What is a SaaS company?
A SaaS (Software as a Service) company refers to any company whose software is licensed on a subscription basis. The payment model is generally on a monthly and/or annual basis. Think Netflix, Salesforce, Square. 

Why should you care about SaaS companies?
SaaS is BIG and it's getting much BIGGER. The revenues of large SaaS companies are in the billions. Companies such as SAP, Oracle, Salesforce are some of the big names while many others are popping up each week and growing rapidly.

How do we analyze SaaS companies?
Most SaaS companies aren't analyzed like traditional businesses where the focus is on the bottom line. When it comes to startup and mid-size SaaS companies, the profits take a backseat to a few other SaaS specific Metrics.
Here are some of the most important ones - 

1. MRR (Monthly Recurring Revenue)
MRR is the monthly payments the company can expect to receive from its customers. This metric normalizes the big one-off sales and provides a baseline to measure business performance. MRR is helpful to predict cash flow, support strategic planning and enable a quick comparison with competitors.

2. CAC (Customer Acquisition Cost)

Customer Acquisition Cost is the money spent on Marketing and Sales to acquire a new customer. This metric directly influences the profit made from each customer which is critical for the growth and sustainability of a SaaS company. A low CAC allows for freeing up cash flow that can be reinvested into the business which can fuel rapid growth.

3. Churn

Knowing the rate of Churn both on a customer and on a revenue basis is critical. A higher churn means losing the upfront Marketing and Sales effort to acquire that customer. This metric is critical to help understand whether the business is sustainable

4. GDR & NDR (Gross & Net Dollar Retention)
Gross Dollar Retention refers to the extent of the MRR of the customers from a year ago that is retained and excludes any expansion of revenue for those customers. Net Dollar Retention includes Expansions. 
GDR cannot exceed 100%, unlike NDR which can.

To learn more, here are a couple of great resources:
1. https://www.forentrepreneurs.com/saas-metrics-2/
2. https://blog.hubspot.com/service/saas-metrics

4 Tips On Financial Sustainability

I'm always fascinated by how much finance affects all our lives (for better and for worse) through the decisions we make and the ones we don't. To achieve balance, something that's Sustainable is a high priority for me. And learning from my mistakes (and from others'), these are four things that differentiate the ones who achieve financial sustainability and those who wish they could.

1. Finance is less accounting, more psychology

A sweater or those cool sneakers that are 70% off are generally a trap. A lot of people know that but continue to consistently fall for it. When the wise see 70% off, they know that it is still 30% on. There's no point giving that 30% when you can give 0% and move on.
And if you think you really need it, ask yourself whether you would be willing to pay the full price for it? If yes, then you should go ahead and buy it. Else, it's something you can live without and should. Your wallet and the environment will thank you for it.

2. Your money shouldn't take a day off

You should take a vacation from time to time. But your money shouldn't. When you're chilling with Netflix, your money should be working for you. Your savings should ideally not get a single day off and those with wealth know that. Auto-deposits are one way of ensuring that your money is always making more money.

3. Buying eco-friendly-stuff doesn't prove you're pro-sustainability

Buying pins and badges and even eco-friendly products aren't the best way to show your support for the cause. Not buying is the best way. Most eco-friendly products have to be manufactured, shipped and finally sold. Don't buy them, that's much better.
However, when you need to buy something that you truly need - and I hope your definition is quite strict for this - then look for an eco-friendly option. Else, just enjoy a walk in nature rather than in a store.

4. Financial sustainability isn't tough, perseverance is 

This is more of a philosophy than a specific trick but it's the most important. Youtube, online articles, your family and friends can all teach you enough skills to lead a pretty financially savvy and sustainable life.
That's the easy bit.
The real challenge and where a lot of people struggle is the unwillingness to consistently build, track and follow their goals. Don't expect improvements in a few months because even the most skilled need time to build wealth and financial sustainability.
Keep at it and you will get there.

Sustainability in Sports

Apart from my passion and the alliteration, Sustainability and Sports have many other common themes that are quite intriguing. Here are some of my favourite ones -

1. Ajax Football Club's stadium -

Ajax is a footballing giant and when it comes to sustainability, it is an amazing monster. All the seats in its stadium are made from sugarcane and it is one of the few carbon-neutral sporting arenas in the entire world. It uses a combination of wind turbines and 4,200 solar panels to fuel its needs.

2. The world's most sustainable football (soccer) club -
This enviable title was bestowed on Forest Green Rovers from England because it implemented the Gold standard in environmental performance - the Eco-Management and Audit Scheme. Some of their initiatives include - sourcing low energy floodlights, using an organic pitch by avoiding manmade chemicals and providing local and organic food for both players and fans at the venue.

3. Artificial turf -
Using recycled plastic, the new generation of football/soccer pitches need neither trimming nor fertilizers. It's cheaper to maintain and better for the environment. Football heavy-weights such as FC Barcelona, Liverpool, Man United etc. have all incorporated it in their stadiums along with dozens of other sports teams.

4. Clothes and cleats -

Major sports manufacturers are using recycled plastic to make shoes, clothes and even football. A football jersey consumes approximately 13 bottles and over 16 million bottles have been successfully recycled through this process.

5. LEED certification -
The Boston Red Sox, Sacramento Kings and many others have LEED-certified arenas. They use solar panels to reduce greenhouse emissions and also utilize wastewater management practices.

Tips for pitch decks

A great business idea becomes even better with a strong pitch deck. There are some great templates at the bottom and some advice on how to use those templates down here - 

1. Zero clutter policy

Too much information is neither good for the eyes nor for the attention spans of most people. An idea a slide is a good rule of thumb and an image or two that can show your point is even better.

2. Simple problem and solution

Provide a simple (not dumbed-down) problem you are addressing that serves as your hook. Then, show what is your solution to the problem and why it is worth investing in. Backing the solution up with a strong business plan + financial projections is almost the norm.

3. The team

You have a great business plan but why are you the best people to execute your plan? Talk about your team, the experience and the relevant and related achievements. This is as (maybe more) important than the business idea itself when the business is very young.

4. The competition

Even if you are Google or Amazon, always mention your competitors. If you think you are in a league of your own with no competitors, you are probably going to fail. Listing your top competitors provides a realistic picture to the audience.

5. Practice your pitch

A good deck becomes unforgettable when used by a masterful presenter. Practice your pitch over and over - pitching to Venture Capitalists isn't the best time to try a spontaneous speech/pitch. Watch TED talks and/or go join Toastmasters - there are enough resources out there to help you hone your public speaking and it is more important than what the prettiest deck can deliver because the investment is not on the deck but on you.  

A few pitch decks worth looking at - 

https://venngage.com/blog/business-pitch-deck-templates/

Best practices for financial planning (and executing)

Financial planning is important, let's start there. However, for non-financial planners (and sometimes financial planners) it can be a source of crippling trauma coupled with a feeling of comprehensive mental breakdown. Or worse.

Worry not, here's some antidote for you i.e. some of the best practices that pretty much apply for both businesses and individuals.

1. Focus on the narrative behind the numbers -
We are expecting a 20% sales increase; you are expecting a 5% raise at work etc. All of that is the easy bit to incorporate in your financial plan. The difficult/important bit is - WHY are you expecting it? The reason, research, story behind the number is critical for any decent business plan.

2. Get buy-in -

A financial plan is useless on its own. The acceptance of the people affected by it is unbelievably important. The members of the family in case of an individual and senior executives in case of businesses are stakeholders whose involvement and acceptance determines the ultimate success of the financial plan.

3. Reduce reliance on yourself and your memory -
One of the most common advice that applies perfectly to financial planning is - automate and eliminate processes. Use online tools that automate your bank transactions, email financial statements to you/your customer automatically are some simple solutions that automate important tasks and frees you and your memory to focus on other important things (such as playing soccer).

4. Monitor and adapt -
If a financial plan is made every year or quarter and not adapted when circumstances change, it is pretty obvious how hollow the effectiveness is going to be.
A financial plan is more of a process than a final outcome. You have to always adapt and improve.

5. Include the how -

To improve the effectiveness of your financial plan - include details of how you plan to get there. Of course, you won't know everything but some details can form a great starting point. An increase in wages is forecasted - include the expected headcount; for an increase in revenue - add a note on new target markets etc.

6. Make it visual -

I know, I know - financial plans aren't the most visual things on our planet. However, some graphs and charts of critical items such as revenue growth, profit margins, customer acquisition etc. can be shown visually to increase impact because human beings are visual creatures. Also, a bit of colour in the usually black and white financial plans (without making it look like the festival of colours) will not be out of place.

How a bit of accounting could do quite a bit for you

Unless you are an accountant, you probably don't love accounting. Even some accountants don't and no one can blame them. No wonder, accounting and most accountants have never made it to the cover of Vogue.
However, smart people such as Warren Buffet endorse it highly and even suggest that one should never pick stocks unless one understands accounting. Even if you don't want to pick stocks, there are other benefits where a little working knowledge of accounting can help out a lot.

1. Managing daily finances
Every company and individual can benefit from making budgets. It helps to plan, organise and better manage the future and keeps you in control. Financial literacy isn't difficult to attain and its benefits are large.

2. Tracking and reporting
There's a lot of truth to - you can't control what you don't measure. Accountants are taught to be obsessed with tracking and reporting. That's almost a daily requirement. For non-accountants, the habit of tracking their goals, habits, time etc. can help reveal patterns that they weren't aware of. Once you know the problem, it becomes much easier to diagnose.

3. Documenting and auditing

Audit documents, expenses receipts, verification of vouchers etc is not the prettiest part of an accountants job. However, these habits and skills ensure records are well maintained and available for future use whenever there's a need. It is easy to over-rely on memory and accountants outsource it to detailed documents. This micro-habit can easily be inculcated by anyone to reduce moments when we kick ourselves for not remembering something vital.

4. Knowing your debits and credits

Like it or not, we have to deal with bankers and other financial service providers. You can get better deals (or at least avoid bad ones) if you can speak their language. Knowing the basics of your debits and credits doesn't take much time and will serve you quite well. Bonus - your CPA will be so proud of you!

5. Planning and forecasting
Finally, scenario planning and forecasting is an underrepresented but vital skill for accountants (and everyone else). This skill can help most others in their jobs and life as well. Give it a try.

Non-business skills (including procrastination) that add value to business skills

Finance, strategy, accounting - all of those are good to know and nice to have. However, to sign the deal, we all need a little more. Some of these non-business skills can be that missing link.

1. A bit of humour -

You don't need to be a comedian (but if you are, good for you). For the rest of us, a safe joke or two (not 8 or 10, it is business after all) can lighten the room. It can elevate you from just another potential client/employee to a friend. Plus, it is easier to do business with people you are comfortable with i.e. friends and share a joke or two with them.

2. A strict cell phone ban -

Unless you are expecting a call for the presidential nomination, do not text, answer or even look at your cell phone. Establishing trust and empathy with eyes on the screen is not possible.

3. No fluff -
Contrary to what we might have experienced in classrooms and even in some boardrooms, fluff won't get us far. Save the jargon, be to the point and let's all get home on time for dinner.

4. Logic and storytelling wins over pretty slides -
This rule applies because the idea is and should always be at the core of the presentation and not the artistic use of PowerPoint themes and 'free' images pawned off the web. (SideNote - certain classrooms are an exception, you know what I'm talking about)

5. Remember to procrastinate a little -

Apparently, ideas tend to be more creative when you take a little time instead of diving right into them. So, go on and take some time to not do what you should be doing...so that you can do it better.
(Scientifically explained (with humour) in this TED talk - https://www.youtube.com/watch?v=fxbCHn6gE3U)

6. Learn something unrelated -

Having skills that have nothing to do with business skills can be a great asset. It makes great conversation material because even business folks tend to be human after all.
(Suggested learning - Juggling, Rubik's cube and juggling a bunch of those cubes)