Ted Pitts — "The Most Important SaaS Metric Nobody Talks About"


(This article is part of the MicroConf 2015 Recap. Want to explore more talks from the event? Go back to the Recap Hub)

Main Concept

Profit is one of the key factors to look at to determine if it’s worth running your own business

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Talk Recap

Profit as a Metric

  • Don’t hear a lot about this
    • Doesn’t often apply to startups
    • If you’re profitable and sustainable, you’re a business, not a startup
  • VCs are in the business of funding your losses so you can grow big
  • Really awkward to talk about profit
    • Half will think you’re a fool for making so little
    • Half will think you’re a fool for talking about so much
  • Profit is what’s left over once you’re paying yourself a market salary

Why is profit important?

  • Profit is your margin for error
    • If you don’t have profit — and a problem happens — it can cause real damage

SaaS Revenue

  • At what point do you go from making revenue to making profit
  • You could keep spending everything you make and never make a profit
  • When do you decide when to become profitable?

Growth of Profit

  • Minimum size to be viable — Need coverage when someone is on sales or traveling.
  • Market — Small niche puts a limit on the size they could be
  • Personal Goals — What do you want to achieve? (Goal: Never work for someone else again)
  • Opportunity for Growth — Can’t know until you’re in the middle of it. If you can spend $1 and turn it into $5, do that as long as possible.
  • Time — If your app is going to be obsolete in a year, take the profit now.

12 Years of Profit

  • First 9 years? Net out to $0.

Mistakes

  • Made one time sales, not recurring revenue
    • 2009 — Switched to recurring revenue (SaaS)
  • Profit is at the end
    • If you keep switching, you’ll never get to the real money
  • Profit isn’t automatic
    • Very easy to spend

Key Metrics

  • Revenue/Employee (>$250k) — 80% of expenses are employees. Focus on increasing revenue per employee.
  • Profit (>30%)
  • Quality of Life — Take every opportunity to trade money for happiness.

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Profit is one of the key factors to look at to determine if it’s worth running your own business

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(This article is part of the MicroConf 2015 Recap. Want to explore more talks from the event? Go back to the Recap Hub)