We, the people of SaaS, are a disciplined bunch. We obsess over metrics - and optimizing said metrics - more than any other industry in the world. Whether you’re a CSM, AE, Manager, VP, in the C-Suite, or a PE/VC investor, metrics are at the core of your world.
Lead Velocity… Win Rate… CAC… Gross Churn… Net Churn… MAU… NDRR… CAGR… aaaaaaand you get the point.
In spite of all this obsessive measuring, we’ve omitted the #1 leading indicator predicting any company’s success.
Launch Velocity measures how well your company takes a customer from purchase to live over a defined period of time. This metric is the number one leading indicator of churn, and an overall barometer of how well your business is performing, in sync.
As noted by renown Customer Success expert Lincoln Murphy, bad onboarding is the number one cause of churn - and churn is the incumbent, primary health indicator for all SaaS companies.
Launch Velocity = (# Clients Onboarding x ACV x Launch Rate) / (Days to Launch x 100)
Most importantly, LV proactively tells you if you’re going to have a churn issue, when, and with which segment of customers. It’s predictive and actionable, instead of reactive i.e. usage rates, NPS, etc.
It also sheds light on issues with sales overselling or selling the wrong products/customers. It tells you if your product is overly cumbersome relative to the use cases it exists to optimize. It uncovers if your implementation process is broken. It represents how vested your customers are in the success of your solution. It also indicates if customers are likely to expand/upgrade - before you have material usage metrics.
((87 Clients X $4,600 ACV X 40% Launch Rate) / (27 days x 100)) = 59.29 LV
((17 Clients X $3,900 ACV X 67% Launch Rate) / (6 days x 100)) = 74.04 LV
Which company is healthier? The answer is Company B.
But how can that be, Company A is obviously acquiring more customers at a higher ACV, so they *must* be the better company, right???
These are relatively similar companies - SMB SaaS with similar GTM models in their respective markets, at similar stages. Company B is undeniably delivering the right product in the right way to the right customers at the right time, and that sets up clients for more success, faster, which mitigates gross churn, increases negative churn, and increases NDRR. The ever-wise Tomasz Tunguz explains nicely here how and why churn is a more important and a better measure of health.
Since everyone reading this is obsessed with metrics, and likely has a large portion of their performance tied to churn and NDRR, now is the time to add this mega-metric to your spreadsheets. For more insights into how, why, and where your company’s customer onboarding process is broken, apply for early access to Onboard.io, a SaaS made purely for automating, managing, and optimizing customer onboarding.
# of Clients Onboarding is equal to all companies that are post-sale and “pre-live”, meaning they are still in-process of configuring, integrating, training, etc.
Further described as a client who is primarily doing anything they must do prior to using your product in an ideal state where their primary value/benefit has started and is expected to continue occurring through daily use.
ACV is the Average Contract Value of all clients in the onboarding process. Pretty standard.
Launch Rate is equal to the number of clients launched during that period of time, divided by the number of clients in onboarding during the same period of time.
Clients launched in August / # of Clients onboarding in August
Days to Launch is the average number of days it took for all clients who launched during the measurement period.
Not every client in the onboarding phase will launch, so this is not the average time in onboarding, this is only the average time for clients who successfully launched.
Launch Velocity moves in parallel with the improvement of your company’s implementation processes. If your ACV goes down, but lauch rate remains the same, something is wrong with your customer onboarding. If number of clients in onboarding goes down, and days to launch also goes down, your launch velocity will plummet, and you’ll know there is a problem with your customer onboarding.
For questions, feedback, or to talk more about Launch Velocity metrics and how to measure - or what to do when you have measurements, feel free to email me firstname.lastname@example.org.