Michael O'Grady

One more great read for a Friday, OPEXEngine by Bain & Company's white paper "Understanding R&D ROI in SaaS." Assessing the effectiveness of one's R&D investments remains the single most underrated metric in SaaS (in my opinion that is). Sure, GTM and cash efficiency is important, but both are moot if you can't adequately recover the cost of developing that sweet new product (or feature) you just shipped. They measure this using a very simple approach: New revenue in the current year / Previous year R&D expense If your ACV is below $100k, you should be shooting for ~$1.2-$1.4 of revenue growth in next year following your investment. And over $100k, that slips to $0.8-$1.0. They don't discuss why the slip, but I suspect that is because that the $100k price you're relying pretty sizably on an land-and-expand motion which takes a little longer to recover. Missing from the report is how significant these targets have fallen over the past 4-5 years. In a now removed post, Lauren Kelley mentioned that companies in the $20-$50m revenue range should be targeting $2-$4. https://lnkd.in/euBhWtrY

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Check out my latest blog on best practices for building Startup board financial reporting. Part 2 coming next week!

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As I talk with more consumer product companies about using the Pharus platform, I try to hear what parts of the product are most exciting. I expected our custom AI model that provides real time analysis of company data to be "the hook". However, in most conversations, simple, clean, and aggregated financials is enough to get operators asking to be onboarded. Excited that my biggest frustration right now is prospects asking to use the platform when we're not quite ready to launch. We're getting there! #startupjourney #customerdiscovery #productmarketfit #entrepreneurship

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Back in May Mark Stiving, Ph.D. at Impact Pricing LLC and Steven Forth at Ibbaka did a well received webinar on how new AI functionality is being priced. More than 500 people registered. This week, Mark and Steven connected again on the Impact Pricing Podcast. The conversation focused on a theme that had emerged in the webinar comparing the disruption of the SaaS model with the current generative AI disruption. Is generative AI disruption smaller or larger than the SaaS disruption? - For customers - For vendors - For pricing Mark and Steven have different views on this. https://lnkd.in/gjujda3d #podcast #pricing #SaaS #generativeAI #disruption

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Contribution margin is the real top line. Generally speaking, top-line revenue somewhat means nothing from, a bottom-line profitability standpoint... If you're not factoring in the costs per order or per unit that get deducted from every dollar of revenue that you generate. So really, the contribution margin dollars that are left over to cover your fixed overhead, ultimately then contribute to the bottom line. Do you agree?? -- Did you find this post helpful? If so, consider resharing it and giving me Jon Blair a follow.

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