A version of this article previously appeared in Forbes.
L-to-R: John Greathouse, unknown woman about to slap John, Reed Shaffner, Jerry Jao & Ara Mahdessian
My venture firm, Rincon Venture Partners recently teamed with Jason Lemkin, Founder of SaaStr, to host the first SaaStrX event. I had the honor of moderating a panel of three SaaS CEOs who have collectively raised nearly $40 million of venture capital and are on their way to breakout success: Reed Shaffner of Workpop, Jerry Jao of Retention Science and Ara Mahdessian from ServiceTitan.
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The Most Important Metric
We had a spirited discussion regarding a number of issues related to blowing past $10M in annual recurring SaaS revenue, in front of a sold-out crowd of about 400 entrepreneurs. The evening would not have been possible without the generous support of Rainforest QA and Cornerstone onDemand.
Near the conclusion of our discussion, I asked each CEO to name any non-obvious metrics by which they guide their businesses. All of the answers were insightful, but I found Ara’s reply to be especially instructive.
He started by stating, “We track customer success.” My initial reaction was, “Great, but I am not sure that qualifies as non-obvious” but then he quickly knocked it out of the park, adding, “We define ‘customer success’ as enabling our customers to generate more prospects and close more sales. In other words, are we measure whether or not we are truly making our customers more successful.”
Ara went on to note that ServiceTitan has been experiencing negative churn, netting 120% annual revenue growth from existing customers. As Ara’s customers thrive, they deploy even more of ServiceTitan’s solutions, which in turn spurs their growth even further. By properly defining and tracking customer success, Ara’s team has tapped into a powerful virtuous cycle.
When Ara concluded his definition of customer success, it was clear that his approach is anything but obvious.
Sure You Track Satisfaction, But Whose Success Are You Monitoring?
Many companies create customer success teams to onboard and upsell customers. These teams gauge customer satisfaction by tracking net promoter scores, customer churn, renewal rates, etc. However, these metrics measure your company’s success, not that of your customers.
In contrast, entrepreneurs who want to build sustainable businesses which blow past $10M in annual recurring revenue, should track metrics tied directly to their customers’ achievements.
Such metrics will obviously differ. In ServiceTitan’s case, its appointments and service calls. If you sell a cost savings tool, measure the actual costs saved by your customers. If your solution increases efficiency, determine a proxy by which you can estimate the effectiveness of your tools within your customers’ organizations. The key is to focus on your customers’ metrics, not your own.
Irrespective of your products’ value prop, if your customers’ accelerate the achievement of their goals by deploying of your solutions, you can be assured that your own success will follow.
You can follow John on Twitter: @johngreathouse.
Image credit: Drew Haines of Devco