EPISODE SUMMARY
In this episode of Scale Your SaaS, I had the opportunity to delve into finance and accounting with Jason Kruger, President and Founder of Signature Analytics, who has made it his mission to help businesses achieve their financial goals.
The discussion covered various aspects of business finance, from understanding critical metrics to weatherproofing your business for uncertain times.
Let’s recap the insightful conversation and highlight the key takeaways that can benefit small business owners, especially those in the software industry. Read on!
PODCAST-AT-A-GLANCE
Podcast: Scale Your SaaS with Matt Wolach
Episode: Episode No. 289, "Which Metrics to Track as a SaaS Business - with Jason Kruger"
Host: Matt Wolach, a B2B SaaS Sales Coach, Entrepreneur, and Investor
Guest: Jason Kruger, President and Founder of Signature Analytics
TOP TIPS FROM THIS EPISODE
As the world faces economic uncertainties, the discussion provides insights into how businesses can weatherproof themselves. The following strategies are essential:
EPISODE HIGHLIGHTS
In the SaaS industry, where margins are typically high, different metrics come into play:
TOP QUOTES
Jason Kruger
[5:11] “Companies have decided to stop worrying about the economy and just start moving forward. So we're seeing a lot of opportunity. A lot of excitement from that perspective.”
Get even more tips by following Matt elsewhere:
EPISODE SUMMARY
In this episode of Scale Your SaaS, I had the opportunity to delve into finance and accounting with Jason Kruger, President and Founder of Signature Analytics, who has made it his mission to help businesses achieve their financial goals.
The discussion covered various aspects of business finance, from understanding critical metrics to weatherproofing your business for uncertain times.
Let’s recap the insightful conversation and highlight the key takeaways that can benefit small business owners, especially those in the software industry. Read on!
PODCAST-AT-A-GLANCE
Podcast: Scale Your SaaS with Matt Wolach
Episode: Episode No. 289, "Which Metrics to Track as a SaaS Business - with Jason Kruger"
Host: Matt Wolach, a B2B SaaS Sales Coach, Entrepreneur, and Investor
Guest: Jason Kruger, President and Founder of Signature Analytics
TOP TIPS FROM THIS EPISODE
As the world faces economic uncertainties, the discussion provides insights into how businesses can weatherproof themselves. The following strategies are essential:
EPISODE HIGHLIGHTS
In the SaaS industry, where margins are typically high, different metrics come into play:
TOP QUOTES
Jason Kruger
[5:11] “Companies have decided to stop worrying about the economy and just start moving forward. So we're seeing a lot of opportunity. A lot of excitement from that perspective.”
Get even more tips by following Matt elsewhere:
When you're running a business, knowing what to do at what time is really critical, but sometimes we don't know what to do at what time and of course, you come to people like me to help you do that. But really, when you need to look at something, you need to figure out your metrics. But what metrics should you look at and which ones are important? Which ones are not so important as you grow your business? These are all very tough questions. Fortunately, Jason Krueger from Signature Analytics came on the show. And he explained the best metrics to look at that are going to help you understand how to run your business and how to make sure you're pulling the right levers. If you're wanting to scale if you want to grow if you want to make sure that you're profitable. If you want to make sure your financials continue to look good, definitely check this episode out.
Intro/ Outro:Welcome to Scale Your SaaS, the podcast that gives you proven techniques and formulas for boosting your revenue and achieving your dream exit brought to you by a guy who's done just that multiple times. Here's your host, Matt Wolach.
Matt Wolach:And welcome to Scale Your SaaS very excited to have you here. Thank you for being here. By the way, if you are new to the show, our role here is to help you grow your company so you can understand the best ways to generate leads, build an amazing team, close all kinds of new clients and get to that valuation you want to get to. So we're gonna put the best people in front of you who've done that or who know how to help you do that, so that you can learn all of these great things. If that's something you like, definitely hit the subscribe button right now. So you do not miss any of our upcoming episodes where we're gonna put amazing people out there to share their experiences with you and share all their knowledge. And today, I'm super pumped to have Jason Krueger with us, Jason, how you doing?
Jason Kruger:Good. Thanks for having me on, Matt.
Matt Wolach:Absolutely. I'm really glad you're here. Thanks for coming. Let me make sure everybody knows who you are. So Jason is the president and founder of Signature Analytics, and what they do they provide expert level Accounting and Business Advisory solutions to small and middle market businesses. Jason is shaking up the way business owners run their businesses by highlighting the gaps in data and reporting that many business owners face and sharing insights on how to improve profitability, increase productivity and run your company smarter. Jason has 20 plus years of experience in the accounting and business Advisory field, working with mid market companies and nonprofits. He is super knowledgeable about this. And I'm so glad he's here. Once again, Jason, thanks for coming on the show. Yeah, thanks again. Absolutely. So tell me what's going on with you lately? And what's coming up?
Jason Kruger:Yeah, we've actually been pretty busy. Lately, with the different times of the year, the economy is actually a little bit unusual this year. So it's been kind of a an unusual year, I think we've gotten to a point where companies have decided to stop worrying about the economy and just start moving forward. So we're seeing a lot of opportunity, a lot of excitement from that perspective. And, you know, really just, as you mentioned in the intro, you know, our goal is to help business owners achieve their goals. And the way we do that is given is by giving them visibility into the metrics of their business visibility into their financial information. So that they can make educated decisions to achieve the goals they have internally, but also to be able to talk in a sophisticated manner to third parties. So you're talking about banking, relationships, financing, investor relationships, going to market those types of things. So a lot of good things happening right now. And I'm just excited to be on your show.
Matt Wolach:So cool. And I want to learn about a lot of those things you just mentioned. But first, I want to understand what made you decide to start the company in the first place? How did it all come to be?
Jason Kruger:Yeah, so I, I definitely have an entrepreneurial spirit. But I also like to make sure I have a solid foundation that I can rely on before I make that leap of faith. So I spent the first close to 10 years in my career in public accounting, most of it with Deloitte, which is one of the large, big four accounting firms, globally, I guess. And I was working in financial statement audit. So I had a lot got a lot of experience working with companies in all different types of industries. SAS being one of them. And what I observed even with working with companies at a big firm like Deloitte, we still worked with a lot of mid market, we still worked with a lot of companies that were in their early stages. They had investor opportunities investor. They had a lot of growth opportunities because they were bringing in investors. And what I observed quite a bit working with those companies is that companies in the small and mid market they really deserve better than what they're getting as a related As to accounting and financial visibility, and awareness, and so a lot of these companies that might be their first time starting a business, they, they know their product, they know their industry, but they don't have that foundation in other areas of their business like finance and accounting, like sales and marketing. And I know you've worked with a lot of companies on sales and marketing side. HR, I mean, I never knew how important HR was until I actually started a business. And it's a lot of business owners think it's just a throw in at the end of the day, well, you know, basic stuff. So what I realized, and I saw as little business owners, they, a lot of companies, they look at accounting and finance as a necessary evil. So I gotta pay my bills, we got to make sure I invoice and collect cash, I got to make sure I have enough cash to make payroll, and then my got to make sure my taxes are filed to the end of the year. And they don't have the a lot of companies I've worked with or observed, they didn't have the sophistication, or the right team in place to truly drive value and take that from a necessary evil to a value driver in their business. And even if they did want to the talent in in the accounting and finance world can be very expensive for those types of companies. And also, they don't necessarily need a full time, CFO, they need a full time CFO or controller, they didn't need a full time, you know other areas of their business. And so what I was able to do is take that idea of leveraging the top talent in the market, providing flexible, scalable way to provide that talent to companies that gave them that's shifted that mindset educated them shift that mindset from necessary evil to now you're getting consistency in how your how your accounting and financial information is being presented. You're getting consistency and reporting and data that you can evaluate and make decisions on on a consistent monthly ongoing basis. Start with monthly but you can dig into weekly, even daily, real time data and information as you want to, to really give you that information gives you that power to make decisions. And so started signature analytics in 2008. With that mindset started with, I had to turn in my computer, so I had to buy a computer that was my big investment upfront and started networking and over 15 years, we have 80 plus full time employees, we're very big on full time employees, we're not a staffing or recruiting firm, we have a process that we train our team on on how to deliver and and we provide that financial leadership to our clients to really give them that visibility, given that comfort and support that the accounting finance arm has been managed effectively. So they can focus on what they do best, which in most cases is not accounting and finance. But also to give them the visibility and the metrics they need to truly drive business valuation and take their business to that next level.
Matt Wolach:I love it. Lots of things to unpack there. I want to start with what you just finished with the metrics. What are some of these key metrics that business leaders should be thinking about that help them understand if they're on the right track?
Jason Kruger:Yeah, it's so the SaaS industry is unique, right? I mean, a lot of other industries, the metrics might be very similar to a lot of other industries margin is a big driver on truly understand your margin if you have different products or services, understanding the margins of your industry and your business that really drives overall profitability. The SaaS industry is a little bit different because the overall the margins tend to be very, very high. Now there's only a several, you know, the margins when you talk about the cost of goods sold that impact the margin. In the SAS industry, there's really just your hosting costs, your employee costs related to keeping the production environment running. And, you know, some customer support costs, but the margins tend to be very high. And that's why they're so attractive from a valuation perspective. Right? I mean, you get much higher valuations and SAS than you would in my industry, for example, which is professional services, right. So the the metrics and in that industry are different. And so you're really looking at the the exciting part about a SAS industry, is that recurring revenue, recurring revenue base, so you're talking about what is your monthly recurring revenue? What's your annual recurring revenue? If I have a monthly recurring revenue of $100,000 in December of one year, well, I have basically effectively a $1.2 million run rate, right? And so how do I then build upon that my goal is moving into January and by next December, I want to be at 150,000 or 200,000 or 300,000, whatever that might be. That's true value that to an outside party might be looking at. And so then what goes into that run rate is your churn rate, customer churn rate. So how do I, what are my you know, let's make sure I understand what the industry benchmark are on that. And then what am I doing to make sure that I'm limiting that churn, and every software, every company is a little bit different on how their customers might use that. The other piece I see a lot of software companies, especially up front is they're performing a lot of professional service tech work. And a lot of times, that's just to generate some revenue to keep the lights on. But it's also important to know that the true value is not necessarily in that it's really in their software component. But you know, and so when a value of when a company is going to be valuing your business really gonna be looking at that software component and the metrics around that, you may get little to no value in that the the true service side of that business. burn rate is critical. Most software or all software companies, when they start, they're there, they have a lot of expenses, now having a revenue and then start you're generating revenue. But their expenses are still exceeding that because now they're into the marketing sales and marketing phase of that of the product offering which I know that you work closely with companies on. So understanding that burn rate being a when you're working and reaching out to potential investors, they need to understand what that looks like. And then being able to forecast out, ultimately how you get beyond that burn rate to cash flow. The last thing is customer acquisition cost, understanding the investment you're making in sales, marketing, and how that truly impacts your revenue growth, making sure that when you're spending $100, on sales and marketing, your return and the value you're getting out of that is obviously greater than $100. And to maximize that is critical. So those are kind of some of the key metrics that we look at, and that we work with and make sure that our clients have in their hands as they're moving forward in their business. Yeah, I
Matt Wolach:think it's critical, I think, especially early stage, so many leaders don't look at their metrics enough or looking at the wrong ones. And they don't realize what they should be focusing on. You know, as they say, if you don't track it, you can't manage to it. And so it gets really hard to kind of do the right things and pull the right levers in your business if you don't know exactly what you're supposed to be doing and what you're supposed to be aiming for. And so I see that a lot as well. I totally echo what you're saying on that. One thing I want to touch on, you did talk about your own team and that you've gotten to add team members. That's fantastic. Congratulations. It seems like you're growing great. We'll be right back. scale your SAS is supported by Toro wave. Lots of software leaders I talked to are looking to scale their SAS and I keep hearing over and over about one major struggle getting ghosted by buyers after the demo. How frustrating is it when you have a great demo? You're feeling good they like it. It seems like a done deal. And then crickets, nothing reach out. They're not responding to you at all. And when these software companies they asked me to dive in, I noticed that the sellers are following up the wrong way. Or actually I should say with the wrong medium. What they're doing is they're hammering emails over and over again. I got a newsflash for you. Email effectiveness is dwindling down and down every year. So why beat your head against the wall losing all kinds of business, start texting mixing texts, along with emails and calls and watch your conversion rates go up. In fact conversion rates go up by about 50% When you use texting as part of the follow up people are used to it and did you know though response rate on text is 98% 98%. So why throw emails into a black hole knowing that they're never going to get returned text buyers and get results but don't use your own phone all kinds of security and compliance issues if you do also none of that data is with your company. That's not good. Instead use this system Toro wave Toro wave is designed for sales. It makes texting with buyers super simple and fast and it helps drive more deals, deals that you've been losing until now for being a listener. You get 50% off your first month of using Toro away 50% off just go to Toro wave.com/scale That's t o r o wav.com/scale get signed up and start winning more deals like Tracy who closed $170,000 In three days after starting again go to Toro wave.com/scale Catch up and win by texting with poor win. And we're back.
Jason Kruger:Going back to the importance. It's it's critical that business has confidence in their accounting and financial process. One is for the day to day activities, paying bills invoicing, managing cash. Cash flow is critical for all businesses in the early and mid, you know, for all businesses, but especially in the earlier stages and and stages as they are in growth mode. So if, if you're not doing anything else, make sure you have the opportunity or the ability to properly manage cash, and understand what that means. And it's not just managing cash this week, it's being able to look forward, you know, over the next couple of months and projecting out over the next year even. So you really have a good understanding of your business and, and that goes into forecasting and how you manage your business and expenses. So the importance of, of having the financial information that trust in the day to day is critical. And then it's critical also to be able to have consistency and confidence in the information and the numbers and the reporting that you're getting on an ongoing basis at a minimum monthly. So there needs to be a close a monthly close process to close the books, to be able to produce the good financial reporting. So you can evaluate that, it becomes even more important as you are starting to talk to outside third parties who are going to be wanting to look at your financial information. It's critical that that information is provided in a manner that provides credibility to the management team. And is, you know, is accurate and is in a format that makes sense. The worst thing to do in my opinion, is to hit print on QuickBooks when the third party asked for it and just send them the information. Because at that point, they can then take that information, they can draw any conclusions they want, they can make any assumptions they want, you've given that outside party the opportunity to tell your story. And what we want to be able to do is take the information and provide it in a manner in which we can tell your story in the right way to that third party, and then have the backup to support any questions that they may have. And that's critical, and that creates credibility, and ultimately impacts overall valuation as you go to the market. Our team, as I mentioned, we have a very strict client service process that we that we follow that our team follows on how we approach our clients, we start every engagement with an assessment of the accounting and financial environment, we look at the people, the current the current people in place, the roles responsibilities, we look at their current processes, we look at how they're leveraging internal technology, and how it impacts the accounting and financial environment of the business. And then we're looking at the overall reporting structure. And in SAS you're looking at, you're looking at, it's not just financial, financial metrics, its operational metrics are a big part of that metrics around your customers, and what's happening with you know, how your customers are using your software. That's a big part of that as well. So making sure you're tying in all metrics associated with the company. And then we built the QA QC process behind the scenes and the oversight to ensure that all of our clients are consistently provided the consistent service and to meet the quality expectations. We're not a bookkeeping firms, we're not going to just throw out people and just go do your bookkeeping. We're, we're a company that if you are at a certain point, and you're looking forward, and you're seeing growth, and you see opportunity, and you want to take your business to that next level, we're the company that will work with you to achieve those results.
Matt Wolach:Make sense? So what are some of the mistakes that you're seeing small business leaders make with regards to accounting and, and their analytics?
Jason Kruger:Yeah, one is that they're not paying any attention to it. So you know, like I mentioned before, cash is critical. So understanding your cash flow, if you're in a business that is pre revenue, or or you know, your expenses are exceeding revenue, gotta have a plan to understand cash. So forecasting and budgeting becomes critical. We want to make decisions, you know, typically on an annual basis, so you budget your forecast for the upcoming year, that then drives your strategic decision making and how you're determining how you're incurring, you're making investments throughout the year. And then following that, things tweak and change along the way and you can tweak and adapt as things go on. They want to make sure you have some sort of a plan that you can execute against financial plan that you can execute against you understand what that means. It also helps when you're looking at going to investors to be able to make sure that they have the information they need to make a sound decision to partner with you and your business. So those that's that's a that's a critical component if anything else and then to be able to see consistently see the metrics that we discussed your overall understanding of your business, and we haven't even gotten into sales and and administrative have costs associated with the business. Right? So those are, those are additional costs associated business that needs to be incurred. But it's important to evaluate each one to make sure that you understand the value that you're getting out of that as it relates to your business. So every cost is important. Sales and marketing, it's critical to understand what is my investment? What is the value that I should be getting out of it? How do I measure that value in my business? When we talk about, you know, we look at all areas of SG and a costs. And, and we start to see that there may be some costs that the company is not getting value in, or they they thought, hey, you know, they brought in somebody, because they felt that there was going to be a certain level of growth in the business that hasn't matured or happened. So we need to reevaluate that individual, and are they truly adding value to the company as we look forward in the business?
Matt Wolach:makes so much sense? I know you've talked about it before, and we've got some crazy things going on in the world and could be a possible recession coming up? How should people be weather proofing their business? To get ready for a downturn?
Jason Kruger:Yeah, exactly. I think that what's most important is, as I talked about before, cash, right cash flow, understanding what that means to your business. So if you have investors, make sure that you're talking through that with them, what does this mean to the business? And what is their appetite for, you know, continuing to invest in your business? We look at so it's basically finalize your short and long term strategy associated with cash. That's either debt or equity. Or if you're personally funding that, what does that look like and understand different scenarios and what how they would economy might impact your business, as you look forward into your business, and the burn rate we talked about before, what what is, you know how scenario planning is critical, and making sure that we understand different, you know, how the economy may impact us in different ways. So that's critical. I talked about validating your team, you, we may have made investments in our business to grow last year or two years ago, that may or may not have materialized. So we need to continuously validate our team and make sure that every person as part of our team is still aligned with the help with the path that we have moving forward. Or does it has it gotten to a point where we're trying to fit a square peg in a round hole, and we have somebody on our team that really isn't necessarily the best fit for what we're trying to accomplish moving forward. So really making sure that your team is streamlined. And you know, I know that those are difficult decisions to make when it comes to right sizing your team laying individuals off. But you know, we're also talking about the health, the long term health and the goals of your company and yourself. And sometimes that needs to be done. Real Estate flexibility, you know, in the COVID. Economy, does it make sense to have to be paying rent or lease costs associated with your business in an uncertain time, some companies they feel that it doesn't make sense, others don't. Some are going hybrid, and they're still trying to figure it out. One thing that we did, we had actually physical office locations, three physical office locations, that we let the leases expire over the last few years. And we did that because we realized that one allowed us to be more flexible with our clients. We're servicing about 90% of our clients fully remote now, because that's the world that we we tend to be in for servicing clients all over the country. And we realized that we didn't need the office space that we're investing in. Now, what comes along with that is making sure that we have the culture that can support ensuring that our people are continuously stay involved in our company, which is critical. And that's the HR part of the HR component I talked about earlier, and the importance of that. So that piece is very important as well. We talked about evaluating SG and a costs I what I found, and I know we're talking about SAS, but technology costs can creep up in a business, right? So are you actually using all the technologies that you're investing in? Right? You know, as an example, I companies use Salesforce, it's very expensive. Let's make sure we size that a minimum right size, the number of users that we have in place. And then the last thing is making sure that you truly even in SAS understand what drives profitability and your margin. And continuously looking at how you can maximize that.
Matt Wolach:Super good stuff. So as we wrap up here, what advice would you give to new software's founders who are starting out and wanting to make sure that they get things right from the start?
Jason Kruger:Yeah, I mean, getting right from the start is critical. I'd say that we everybody starts a business because they have a certain level of expertise in a certain area. What I, the advice I give to business owners as they're starting is, it's critical that you obviously you obviously know your business, you know, your product, you know, your service. What's critical, though, is knowing all aspects of a business and your business. So what I think a lot of business owners feel is, well, you know, I'll focus on building the software and I'll hire it all, eventually I'll hire a sales team, and they'll take care of that I'll hire an accountant or a CFO, and they'll take care of that. It's critical that you start to become as much as you can knowledgeable about sales and marketing, knowledgeable about financials, financials, they, you know, take a deep dive into that information knowledgeable about operational side of your of your business, you want to hire the experts that obviously you can, and can work with you from the ground up. But you have to be able to provide leadership and support and evaluate the success of different areas of your business. So it's critical to have that knowledge base of, you know, how does sales and marketing work in my business? That's why we should be talking to Matt, right? How does finance and accounting work in your business? You know, we're a great resource for that, or somebody else might be a great resource for that. But really, truly understand your business and all areas your business is critical. I totally
Matt Wolach:agree. Great stuff. Jason, I really appreciate you coming on. I want to make sure everybody knows how to get in touch with you. How can our audience learn more about you and signature
Jason Kruger:analytics? Yes, pretty easy. Our website signatureanalytics.com. I can be emailed directly at the letter J.Krueger@Signatureanalytics.com Always happy to talk to any individual that wants to reach out. If I can help them, that's great. If I don't know the answer, I'm pretty sure I can point him to somebody who does. And, you know, always happy to talk to business owners. Excited to see what they're doing and how they're changing the world.
Matt Wolach:Perfect. We'll put all that into the show notes. So if you're listening, you'll be able to grab it there. Jason, this has been great. Thanks for coming on the show. Yep.
Jason Kruger:Thanks so much, Matt. Appreciate it.
Matt Wolach:Absolutely. Thank you out there for listening. Appreciate you being here. Remember to subscribe so you don't miss any of the other amazing people. And creators like Jason can tell you all the good stuff you need to know to grow your business. So thanks for being here. Take care, and we will see you next time. Bye bye.
Intro/ Outro:Thanks for listening to Scale Your SaaS for more help on finding great leads and closing more deals. Go to Mattwolach.com