"Rise Above The Numbers" by FP&HEY

Want to see a real-life, public example of FP&A driving financial results?

We break down Mimecast’s public earnings release.

Drew helped create some of these metrics during Mimecast’s IPO process.

Case Study: Mimecast

Think about the software you use and pay for right now.

That software is provided by SaaS (software as a service) companies.

And you are contributing to those software companies’ metrics by using and paying for their services.

Mimecast is a SaaS company too, they provide cyber security solutions.

Let’s dive into Mimecast’s public earnings release, which is full of SaaS metrics you can apply to other SaaS companies.

🔥Follow along with us by pulling up Mimecasts external report here.

Show Notes

* 00:35 - Case study time—Mimecast.

* 01:30 - It’s all about KPIs and metrics.

* 01:59 - Constant currency strips out one-time items and fx.

* 02:41 - AOV (average order value) tells your upsell story.

* 03:45 - Average product counts indicate customers are willing to buy more stuff.

* 04:27 - White space can help operationalize upsell using product counts.

* 05:45 - Customer segmentation is a great way to analyze your customers.

* 06:34 - Creating metrics starts with a manual spreadsheet, then automation.

* 07:30 - Lemonade stands can teach us a lot in FP&A 🍋

* 09:30 - Net revenue retention rate (NRR) combines customer retention and upsell.

* 11:30 - Look at your own spending habits to assess your NRR with companies.

* 13:59 - Big finish—you can create KPIs and metrics in FP&A that drive results.

It’s All About KPIs (and Metrics)

Financial and non-financial data is best served when connected to your company’s goals.

How do you do this?

Creating KPIs (and metrics).

🔥TIP: Here’s your essential guide to creating KPIs and metrics.

In FP&A you can help your company create them.

Which influences what you report:

* Internally to guide your business partners to achieve their department goals

* Externally to tell your company’s performance story to investors

Find what other companies report on in your industry as a starting point.

Examples of SaaS KPIs (and Metrics)

Mimecast disclosed several financial and non-financial metrics to tell its external performance story.

Here are 3 that you can apply to companies you work for:

1. Constant Currency Revenue Growth Rate

Your company’s revenue performance has a bunch of drivers.

Stripping away one-time events and foreign exchange (aka fx) helps to clean up the story you tell.

You can do this in 3 steps:

* Step 1: restate your current period revenue results using your base period’s fx rates

* Step 2: remove any portion of revenue related to M&A activity that don’t exist in both the base and current period

* Step 3: remove any portion of revenue related to one-time events that don’t exist in the base and current period

NOTE: companies will have different approaches to constant currency reporting, the above is one example.

2. Average Product Counts

Your customers buy stuff that your company sells.

The more stuff your customers buy from your company is usually a sign they like buying from you.

It’s a matter of using product counts as your numerator.

And customer counts as your denominator.

🔥TIP: Here’s how to calculate product counts at your company.

3. Net Retention Rate (NRR)

SaaS companies are all about ARR (Annual Recurring Revenue).

NRR can help you assess the health of your ARR.

That’s a lot of acronyms.

Do this by breaking apart your month-over-month results into:

* Churn - customers that leave you

* Downsell - customers that spend less with you

* Upsell - customers that spend more with you

* New - customers that are brand new buyers

🔥TIP: Here’s more info on how to calculate customer churn.

🔥TIP: Try segmenting your customers to learn more about them.

Conclusion: You Can Shape Your Company’s Story

In FP&A you can create KPIs (and metrics) at your company.

Don’t stop there.

Help influence your company’s results by connecting them to your company’s daily activities.

That puts you front and center to tell your company’s performance story.

AND helps you influence what future story is told.

Resources

▪️ Follow us on LinkedIn: https://www.linkedin.com/company/fpandhey

▪️ Email us your burning FP&A questions at info [at] fpandhey.com

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit fpandhey.substack.com

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit fpandhey.substack.com