Software Executive Magazine

August/September 2017

Software Executive magazine helps software executives grow their businesses by showcasing the business best practices of our readers, executives from established and innovative software companies.

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A THERE ARE MANY METRICS I COULD REFER to related around customer satisfaction, churn, or lifetime value of a customer. But the bottom-line "metric" that matters, if I only have to pick one, is revenue. Without revenue, you or some syndicate of financial backers/stakeholders have to keep financing a business yourself, and eventually the ability to finance a business becomes untenable. The quantity of revenue is also what determines the cash flow you have less operating expenses and capital investments, excluding finance activities. And it is the metric that is used most often to measure the market power of a company, its growth, and to rank it with its peers. The business leaders who don't focus on pursuit of revenue will fail their business, which can ultimately only be successful if it has revenue from its activities. MARNE MARTIN CEO, ServicePower A INSTEAD OF FOCUSING ON ONE METRIC, I try to focus on a few key metrics that help us understand the customer experience, such as conversion rates from free trials to paid subscriptions, churn rates, and how long it takes the customer to "go live." Each of these tells us about the customer experience. "Trial conversion rates" tell us how many of our prospective users like our free trial enough after playing around with the software for a couple hours to write a check. "Time to go live" captures how easy it is for new users to understand the application, import data, configure settings, and train employees. We want the onboarding process to be super easy for customers, so we continually focus on shortening the time to go live. "Churn rates" capture how many customers decide to look elsewhere after using the system. Obviously, we want this to be zero, but as that's not realistic, we try to closely track the causes of churn. We try to avoid relying on pure growth metrics, such as daily user growth or revenue growth. Our feeling is that these metrics are byproducts of a good customer experience, so we prefer to focus on metrics that capture and provide insight into the customer experience instead of metrics that just measure growth. KEVIN KOGLER Founder & President, MicroBiz Q A AT SOME POINT DURING AN M&A PROCESS, you will share your forecasts with prospective buyers. From that point on, you have a whole new metric to keep you up at night. Missing your numbers midway through the process will hurt the valuation and may even kill the deal. On the other hand, surpassing your numbers underscores your worth to the buyer and should give the ultimate deal value a boost. This may seem obvious, but you'd be surprised how frequently companies miss their numbers at the worst possible moment. It's easy for a software CEO to get sidetracked during an M&A process — selling a tech company is a full-time job, and most CEOs are already doing two or three of those! Even in an ideal situation, buyers' meetings are distracting, deal fatigue can set in, and the usual attention to detail that makes you a good CEO can splinter. Sharing the load internally is wise, but be careful—the more people involved in the deal, the more people distracted by it. A high level of internal confidentiality is generally the best move. TIM GODDARD Senior VP of Marketing, Corum Group You could spend hours every single day going down a rabbit hole in search of the best metrics to evaluate your software company. Whether it's your executive team, your board, your investors, or your employees, every stakeholder in your software company might have their own favorite metrics. We asked our editorial advisory board to sound off on what metrics software companies should care about the most. 9 SOFTWAREEXECUTIVEMAG.COM AUGUST/SEPTEMBER 2017 Software Executive is proud to introduce our inaugural editorial advisory board. These thought leaders represent software companies of all shapes, sizes, verticals, and applications. Their expertise spans operations, marketing, customer success, development, sales, and everything in between required to run a thriving software company. They'll be a focus group to give our editors input on the issues, trends, and challenges that are affecting software companies. We're promising Software Executive will be a peer-driven publication, and these are your peers who have stepped up to lead our charge.

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