Benchmarks for Rule of 40, 118% NRR, 89% GRR and customer lifetime, plus the goal-setting cadence behind them
Mark Douglas · LCPTracker
Published September 6, 2024Explore the lesson. Sign in to access the slide download.
Topics covered: Really super excited to be here I am a…; Is 117% so if I had a th000 contracts…; Between May and June we get together at the….
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“um really super excited to be here I am a bootstrap company doing 32 million this year and I've taken no debt no equity and uh what I did is I put this presentation together oh I guess I got to switch it here my name is Mark Douglas LCB tracker um but we are performing at really excellent high levels uh what most firms would be rated at I'm going to go”
“is 117% so if I had a th000 contracts the a year later I have 900 and I'm you'd think I'd only be at 90% of the revenue but those 90 contracts are still producing 117% of the revenue I was 12 months ago so that's through and I'll I'll show you how that works out so over the course of um and then you got to add the AR in”
“between May and June we get together at the board and the the the SE Suite we decide what are our top three priorities that's it three for the year next year and we set those out and then we we have the SE Suite go in or your key management go in and do um a kind of a bottomup approach okay if these are your three top priorities how am I going to support those and then we have a budgeting process in August September”
“that get HR on it make make sure we're moving to uh um bring that back up above the goal that they had and then it all lines up so nicely um and then the third and final section is some of the other things that you have to do in order to make this happen backup house systems and then I'll talk about value and annual cycle so we took a really strong”
“Rule of 40 Growth plus EBITA is 40% Growth rate and free cash flow rate as a percentage of revenue.”
“Benchmarks vs.Industry We retained almost 89% of our existing base past 12 months NRR 5 pts above the industry’s 75th percentile LTM and GRR is 2 & 1 pts above median benchmark LCP 12m LCP 12m 75% SaaS Co. 75% SaaS Co. Mean SaaS Co. Mean SaaS Co. 25% SaaS Co. 25% SaaS Co.”
“Financial Planning Process (2)”
“RepeatableProcesses Detailed P&L Review with CFO Retrospective & Forecasting Calls New Hire Approval Project Spending Monthly Business Reviews with each C-Suite member to discuss wins & losses:”
“Value Creation (3) Your entire staff must be bought into caring for your clients & users Long-term relationships You must truly care Require that every interaction with clients creates value.”
Video
Why My Bootstrapped Company Ranks At the Top of Every Financial Metric in the SaaS Industry - Slide Deck
It all started in 2001, when LCPtracker CEO Mark Douglas envisioned a Software-as-a-Service (SaaS) solution geared towards prevailing wage compliance for K-12 school construction. After two years of development with just a three-person team, LCPtracker Professional was officially launched. By 2006, their client roster grew nationally, expanding beyond K-12 schools and gaining clients such as cities and transit agencies. Mark has a plan to eliminate poverty with ‘15 for the 15', and is committed to using technology to transform lives while building better communities.
Mark Douglas · LCPTracker
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Alex Quilici · YouMail
Kyle Racki · Proposify
Savneet Singh · PAR Technology Corp.
Nicolas Vandenberghe · Chili Piper
Each slide with a short explanation of what it shows. Open the slide text for its exact wording.
19 passages
SaaSOpen, September 2024 The Blueprint for Success: Why Our Bootstrapped SaaS Firm Leads Every Financial Metric Mark Douglas CEO, LCPTracker
The talk is organized into three parts: benchmark results, financial planning, and building scalability. Each part lists three topics, from Rule of 40 and customer lifetime value to goal setting, OKRs, systems integration, and the annual planning cycle.
Over the next 20 minutes I’m going to show you Benchmark Results Rule of 40 Lifetime Value of a Customer ARR Growth & Benchmarks vs Industry Financial Planning Building Scalability Goal Setting Objectives & Key Results Repeatable Processes Back-of-House Systems Integration Value to Staff & Clients Annual Planning Cycle
The company frames its work around a vision of empowering people to build better communities. The slide gives background on a payroll reporting and compliance SaaS for construction, started in 2001, and a mission of offering the most comprehensive labor compliance solution. It also mentions workplace awards.
Vision & Mission
Section 1 covers the benchmark results in three parts: Rule of 40 under ARR metrics, lifetime value of a customer, and ARR growth compared with industry benchmarks.
Rule of 40 Lifetime Value of a Customer ARR Growth & Benchmarks vs Industry Let’s jump into Section 1 I’m going to show you ARR METRICS CUSTOMER LIFETIME ARR GROWTH
The Rule of 40 is met when growth plus EBITA reaches 40%. The slide defines it using the growth rate and the free cash flow rate, each as a percentage of revenue.
Rule of 40 Growth plus EBITA is 40% Growth rate and free cash flow rate as a percentage of revenue.
LCPtracker's 12-month net revenue retention is 117%, above the industry 75th percentile of 112% and median of 101%. Gross revenue retention is 89%, versus 95% at the 75th percentile and 87% for the median. The chart also shows a July 2024 reading of 88% GRR and 115% NRR.
Benchmarks vs.Industry We retained almost 89% of our existing base past 12 months NRR 5 pts above the industry’s 75th percentile LTM and GRR is 2 & 1 pts above median benchmark LCP 12m LCP 12m 75% SaaS Co. 75% SaaS Co. Mean SaaS Co. Mean SaaS Co. 25% SaaS Co. 25% SaaS Co.
Over 13 months, trailing 12-month ARR rose from $20.0M to $25.5M, a 27.7% change, while customers grew from 768 to 895, up 16.5%. The table breaks the change into new customers, expansion, upsells, and reactivations, offset by downsells and lost customers.
ARR Growth
Revenue climbs each year from 2016 through the 2024 actual-and-forecast bar. EBITDA remains positive but dips in 2018 and 2021 before rising sharply in 2024.
6 Average Year Rule of “40” Revenue & EBIDTA
The slide links average LTM net revenue retention of 118% and gross revenue retention of 89% to a customer lifetime of over 12 years. Monthly readings from July 2023 to July 2024 fluctuate, with the lifetime line ranging from 11.0 to 14.3 years.
Average Customer Lifetime (1) Average LTM NRR and GRR is 118% and 89%, respectively
Section 2 covers goal setting through three parts: financial planning, annual planning with Objectives and Key Results, and monthly accountability through repeatable processes.
Goal Setting Objectives & Key Results Repeatable Processes Let’s jump into Section 2 I’m going to show you FINANCIAL PLANNING ANNUAL PLANNING MONTHLY ACCOUNTABILITY
The planning process runs in four steps: strategy development and goal setting, budgeting, a daily or weekly scorecard, and monthly business reviews and updates. Goals are set top-down while OKRs are built bottom-up. A template lists three top objectives for 2025, each with three key results.
Financial Planning Process (2)
Monthly business reviews with each C-suite member cover wins and losses through detailed P&L reviews with the CFO, retrospective and forecasting calls, new hire approval and project spending. A dashboard illustrates tracking an email backlog against a target.
RepeatableProcesses Detailed P&L Review with CFO Retrospective & Forecasting Calls New Hire Approval Project Spending Monthly Business Reviews with each C-Suite member to discuss wins & losses:
Section 3 covers building scalability in three parts: back-of-house systems integration, hiring and value to staff and clients, and the annual planning cycle as a process.
Back-of-House Systems Integration Value to Staff & Clients Annual Planning Cycle Let’s jump into Section 3 I’m going to show you SYSTEMS INTEGRATION HIRING PROCESSES
The senior team meets every 2 weeks, reviews work by customer segment, and looks at open, closed, hold, new client, and rollover cases. The screenshot shows dashboards of implementation counts, average age by customer segment, status by month, and open implementations by owner.
Systems Integration Senior team call every 2 weeks Review it by customer segments Look at open, closed, hold, new client, rollover Dashboards we review every 30 days with all managers & direct reports
Hire slightly ahead of need, promote from within and bring in outside experts to fill gaps. The staffing chart rises from 107 FTEs at the start of 2022 to an estimated 175 at the end of 2024.
Staff & Clients Hire slightly ahead of the need Promote from within Hire outside functional experts to fill organizational gaps Retention Rates Industry 14% LCPtracker 3-7% annual Recognize the skill sets and gifts of all Staff & empower leaders to develop plans, processes, and strategies to organize staff by skill sets.
Value creation requires that every client interaction creates value, with the entire staff bought into caring for clients and users, and long-term relationships. The slide closes on the line that you must truly care. The staff growth chart from the previous slide stays on screen.
Value Creation (3) Your entire staff must be bought into caring for your clients & users Long-term relationships You must truly care Require that every interaction with clients creates value.
The annual planning cycle is built from milestones, a monthly schedule, and deliverables, followed by all departments and a corporate check-in to verify results. The example is a timeline across 2022 and 2023 with color-coded status dots for completed, likely delay, and certain delay or new task.
Annual Planning Cycle Milestones Monthly Schedule Deliverables Followed by all departments and a corporate check-in to verify results Milestones, Monthly Schedule & Deliverables
The recap repeats the three parts of the talk: benchmark results, financial planning, and building scalability, with the same nine topics as the agenda. The subtitle notes each was shown with real examples.
Over the last 20 minutes, I showed you: … with real examples! Benchmark Results Rule of 40 Lifetime Value of a Customer ARR Growth & Benchmarks vs Industry Financial Planning Building Scalability Goal Setting Objectives & Key Results Repeatable Processes Back-of-House Systems Integration Value to Staff & Clients Annual Planning Cycle
The speaker thanks the audience at SaaSOpen, September 2024. The slide shows his name, his role as CEO of LCPTracker, and an email address for contact.
SaaSOpen, September 2024 Thank you! [redacted email] Mark Douglas CEO, LCPTracker