Big news: Our in-house expert on SaaS economics is taking our for-employees-only training on the unit economics of our business public for the first time ever! During the event, Isabelle Bensimon will explain the unit economics of a SaaS business model and how these fundamental metrics feed into setting HubSpot’s annual plan.
[Now Closed] Ask Isabelle Anything: HubSpot's SaaS unit economics expert
Thanks again for the great presentation. I valued the simplicity, analytical clarity and focus, which was didactically valuable. Especially for a startup founder the blink into a mature management accounting is worthwhile. Looking forward to reviewing the recording.
Thanks again for the great presentation. I valued the simplicity, analytical clarity and focus, which was didactically valuable. Especially for a startup founder the blink into a mature management accounting is worthwhile. Looking forward to reviewing the recording.
@Bern Thanks so much for your feedback! Are there other topics you'd like to hear about, are there any business challenges you are currently experiencing that would be helpful to deep-dive into? I'd love your feedback, if you have ideas to share - let me know here, or you can private message me. Have a great week!
For a startup that has a yearly subscription, what proxy to use instead of waiting years?
@msibnseddik Sounds like you're asking how to calculate churn rates (for use in the LTV calculation or on it's own), when you're a new business and your customers are on longer contracts. It's a very good idea to install listening devices early on to measure customer happiness and engagement with your product. For instance, are you tracking overall usage of your product or usage of important features of your product? If customers or users are no longer active in your product, this is a strong indication that they will not renew (and will churn). It's also important to start tracking NPS, CSAT, or another regular measure of satisfaction with your product. A low satisfaction score may indicate a high likelihood of churn. Of course, you won't know for certain until the customer comes up for renewal, but if you start collecting these data points early, you'll be able to correlate them with the ultimate churn outcome. At the end of the year, not only will you have a more definitive churn rate, but you'll have great leading indicators/predictors of churn. For example, maybe you'll find that a customer who responded to the NPS question with 4 is 60% likely to churn; or, a customer who is regularly using XYZ feature is 80% likely to renew. You can use these leading indicators to set up alerts and prevent churn.
Is there a way to automatically track Units and Economics on Hubspot?
@kevingiorgis Yes, definitely. I wanted to wait until we announced all of our new Sales Hub features so we could talk about how these changes might affect your reporting.
What does your system of record look like? What other inputs for data do you have into HubSpot's CRM, and do you use any data /reporting integrations? Let's start there... let me know!
In your consideration, what are the best strategies or most important KPIs / points to make a good annual planning and forecasting?
The hard question
To calculate the Customer Lifetime, LTV (and consequently the LTV: CAC Ratio) we experimented with different ways of calculating the churn, because due to the economic reality of our country (Argentina), we must make price adjustments for inflation at least 2 times per year.
1. Net MRR Churn Rate Considering all expansion and contraction of revenue. So the price adjustments generate negative churn for us, and break our other metrics.
2. Net MRR Churn Rate (whitout princing) Considering all expansion and contraction of revenue without the adjustments to try to have a more stable metric.
3. Gross MRR Churn Rate Considering only the revenue contraction.
4. Customer Churn It would be the most viable option but we lose sight of the revenue for the LTV.
So,
To calculate the Customer Lifetime, we use the Customer Churn and to calculate the LTV we use the Gross MRR Churn Rate, since when using the Customer Churn, we see that the LTV grows significantly and we are not sure that it is a realistic value.
(We perform these calculations in both USD and local currency, and we continue to have the same issues)