Software-as-a-service (SaaS) companies tend to be simple from an accounting perspective so new Sinequa CFO Mark Williams intends to spend as much time as possible working with the sales team on pricing strategies to help convert leads to customers, he told CFO Dive last week.
“I’m sticking my nose in every deal of any size and helping the sales guys be successful,” said Williams, who joined the enterprise search software company in February after years on its board. “That’s what I really love doing. From a finance point of view, you sell stuff. You don’t have to manufacture anything. You could have a couple of hundred customers, a couple of hundred invoices per year, so you don’t need a super detailed general ledger.”
The company already had strong accounting and planning teams in place, he said, so he’s focusing on the dashboard for measuring company performance. “With SaaS companies, it’s all about metrics,” he said.
SaaS companies tend to lose money in their early stages because they don’t generate upfront paydays the way on-premise software companies do, so investors rely on measurements like customer acquisition costs (CAC) and customer lifetime value (LTV) to gauge future profit-making ability.
“If you’re not getting more from the customer over its lifetime than it costs you to acquire that customer, then you die,” he said. “That sounds simple, but figuring out the average lifetime value of a customer takes a whole bunch of metrics. It’s average deal size, how long a customer is a customer, and then you have the rate of upgrades and so on. Then, with how much it costs to acquire a customer, there’s a whole set of metrics around Salesforce, productivity [and] how much you pay the sales guy.”
Sinequa, which helps companies tap their on-premise and cloud-based data, is capital efficient, with lean staff and a typical deal size in the hundreds of thousands of dollars, he said. As a result, the company has only needed one sizable capital raise the last 12 years, for $23 million, and that money is sitting on the balance sheet largely unspent, giving the company a means to drive growth.
“We just hired a fantastic guy to run the U.S. [operations],” he said. “He is going to be the catalyst for us. For a company our size, $23 million is quite a lot to invest, so we're preparing to deploy the capital in aggressive growth."
Sinequa’s business has performed well during the pandemic and is positioned to stay strong post-pandemic because of the software’s role enabling companies to leverage their data, Williams believes.
“The problem is not having data,” he said. “Companies have more data than they know what to do with. The largest companies in the world, in over dozens of countries, have thousands of platforms and it’s a devil of all jobs to find out anything.”
In addition to dashboarding company metrics, Williams is helping the company transition into a true SaaS — move from its roots providing on-premise software to a 100% cloud-based product — a transition he undertook at his last software company, Seal, another enterprise search company he helped start.
"That transition is super important,” he said. “So, there’s a lot of investment, even though the technology platform is absolutely top of the class. There’s a lot going on in that area and hiring heavily in the AI and machine learning areas.”