Having served as CFO of several PE-backed businesses, I believe it’s important that growth-focused SaaS companies maximize the CFO’s role in its value creation process.

Over the course of my career, I have sat on both sides of the table as a CFO myself and as an advisor to the CFOs in private equity-backed portfolios. Often I find myself coaching companies to create a “culture of visibility” and showing them how the CFO can lead that mission and act as the epicenter of value identification.

But stepping up and leading a culture of visibility involves a cognitive shift. CFOs typically rise through the accounting ranks, and their focus is on financial reporting and internal controls—ensuring the numbers add up. This is the “financial reporting mindset,” and it helps early-stage SaaS businesses ensure healthy cash flow and smooth operations. But for SaaS companies gearing up for accelerated growth, that mindset needs to shift to include more strategic involvement. The shift from gatekeeper to strategist is to assume a “CFO mindset” and take ownership of one of the company’s most important growth-enabling missions—creating a culture of visibility.

By learning the business rather than simply reporting on the numbers, the CFO can drive a deeper level of accountability and alignment across the organization and help transform the company’s revenue potential.

Three metrics are critical to this mission: renewals, up-sells and new customers. Most SaaS companies track the first metric with varying degrees of accuracy; very few track all three. But without all three metrics in hand, you’re not fully understanding the key drivers to revenue growth and therefore may be missing the mark.

Metric 1: Renewals

Customer renewals are the foundation for sustainable growth and also the least costly way to generate revenue. Renewal rates vary widely, so your renewal goal should be based on solid market research rather than hopeful thinking. For companies with stickier products, rates of 90 percent or higher may be achievable. For others, it could be 50 percent or less, so it’s critical to set expectations accordingly.

What the CFO should know:
  • How was the annual renewal goal set? Is it realistic?
  • Who is responsible for customer renewals…is your organization aligned accordingly?
  • On a monthly basis, are the people responsible for renewals (account or relationship managers, for example) on track to hit the annual goal?
  • What are those people basing their renewal predictions on? Are they communicating with customers regularly?
What they should do:

Confirm that the renewal goal is achievable and review the numbers on a monthly—not quarterly or annual—basis to ensure the company is on track to hit that goal. A monthly review ensures that issues are caught and addressed early enough for the company to course-correct.


Metric 2: Up-sells

Up-sells and cross-sells support healthy growth by increasing the Annual Contract Value (ACV) of existing customers and boosting customer loyalty and retention. In fact, a 2015 SaaS benchmarking survey showed that companies with higher revenues (in $40-75 million range) attribute twice as much new revenue to up-sells as the median company.

What the CFO should know:
  • What is the up-sell revenue goal for the year?
  • What additional features or products will drive those revenues?
  • Do you understand the universe of opportunities within your customer base? Which customers offer growth opportunities for either up-sell or cross-sell or both and why?
  • Are you tracking downgrades and cancellations data at the same time to account for net negative churn in SaaS?
  • Again, who in the organization is responsible for up-selling the existing customer base?
  • How are they performing against the goal?
What they should do:

Ensure an up-sell goal is in place and compare up-sells against the goal on a monthly basis. If the company’s up-sell revenues are not on target, the CFO needs to flag the issue early and start a conversation about what those numbers are saying about sales performance, product evolution and product management.


Metric 3: New customers

While renewals are your baseline and up-sells help to retain and maximize revenues from existing customers, customer acquisition is your key to continued growth. It’s also the growth driver that requires considerable resources to sustain and can burn through them with breathtaking speed.

What the CFO should know:
  • What percentage of the annual revenue goal will come from new customers?
  • How many new customers does that translate into?
  • How many leads are needed to reach that target?
What they should do:

The CFO needs to understand the pipeline math and not just take the sales forecast for granted. Some salespeople are sandbaggers, some are optimists. It’s the CFO’s job, in conjunction with sales management, to adjust for personal variances and use the data to generate realistic figures. To do this, they need to be conversant with four key metrics—deal size, sales cycle, SQLs and lead-to- close conversion rate—that provide visibility into your sales pipeline. (Read 4 Growth Metrics Every CEO Needs to Know for a deeper dive into these essential metrics.


Here’s the bottom line.

A finance executive with a “financial reporting mindset” tells the SaaS organization what happened. If they’re good, they can also tell the organization why it happened. But with a CFO mindset, they can begin to reveal what it all means for the future. When your CFO knows how to understand, challenge and confirm where the organization stands on three key metrics—renewals, up-sells and new customers—they create a culture of visibility and support the insight and agility you need to respond to fast-moving markets and seize every opportunity for growth.