B2B SaaS Metrics and Prioities with the Alexander Group - Ted Grossman and Davis Giedt

**Ray Rike** (0:00)
Hello, I'm Ray Reich, founder and CEO of RevOp Squared, and your host of the Metrics that Measure Up podcast. We talked to a wide variety of B2B, SaaS and Cloud thought leaders, executives, investors, and people just like you to discuss the metrics and benchmarks they use to make metrics and form decisions. Now on to today's show.
Welcome to today's episode of the Metrics That Measure Up podcast. Today, we are joined by Ted Grossman, principal and David Giedt, the director of analytics and research at the Alexander Group. Today, we're going to be covering three main areas with Ted and Davis. First, the top performance metrics that B2B SaaS companies are focused on in 2023 Second, the trend of performance and benchmarks in 2023 And third, how are companies of many different sizes actually using benchmarks to support their growth and specifically how investors like PE companies are using benchmarks to help support their portfolio companies. With that, Ted Davis, please take a moment to give a brief overview of your journey to becoming a guest on the Metrics Measure Up podcast.

**Ted Grossman** (1:26)
Sounds good. And we're so glad to be here, Ray. Thank you so much. This is Ted Grossman. You and I met a couple years ago, Ray. I think you reached out and we have a shared interest. We both love benchmarks. We both love industry trends. And I think we're both very passionate about what's been going on in the SaaS world. I co-lead our tech industry practice here at the Alexander Group, our management consulting firm. And so through various conversations with you, you've been kind enough to introduce us to some of your community. And you asked us recently if we would join this call. So I'm very pleased to be here. And I'll let Davis introduce himself.

**Davis Giedt** (2:03)
Yeah, thanks, Ted and Ray. David Giedt here, leader of our analytics and research practice. I also lead our executive access subscription program and very happy to be here. I've worked with hundreds of B2B SaaS companies in terms of benchmarking, which is a major part of the way that we do consulting work at Alexander Group. And Ray, we've spoken before and I've been part of some of your events in the past and just looking forward to having a great conversation today about Metrics.

**Ray Rike** (2:32)
Great. Davis, Ted, Ray, appreciate it. And anybody who wants to listen to another kind of insights that Ted and Davis have provided, go to the SaaS Metrics Palooza page on our website and you can see their presentation from last October. But let's get into it because I was first introduced to the Alexander Group when I was doing a metrics and benchmarking assessment at a large company. They said they had standardized on the Alexander Group's sales compensation benchmarks. As I got to know you, I realized that, well, the work that you do is much broader than sales compensation. So here's my first question and topic I like to dig into you guys with. How have you seen the use of SaaS performance metrics in their benchmarks evolve over the last few years in B2B tech companies?

**Ted Grossman** (3:21)
Yeah, I know that that's a great question. I think if you think about what's been going on in tech, specifically in software companies over the last 10, 20 years, it's been the move to cloud and it's been the move to as a service. Getting away from the perpetual license, getting into subscription and now getting into consumption oriented models. Now, what do companies care about? What do boards care about? They care about getting the highest valuation they can, whether they're pre-IPO or even if they're in the public markets.
There's a lot of talk and has been a lot of talk about rule of 40, which is let's take your growth rate and let's add it to your EBITDA or your free cash flow rate. If that's over 40, you get a higher valuation than those that don't. I will tell you that almost all the metrics, and this doesn't change over time, are going to be about either growth or they're going to be about efficiency. How efficiently if I put a dollar into the company, into the go-to-market, what am I getting back for it? And I'm being overly simplistic at a high level, but those metrics probably don't change. The key is sort of the waiting and what's been happening lately. How much emphasis do I put on growth? How much emphasis do I put on efficiency? And what kind of efficiency am I looking for? So I think, you know, up until hell, six months ago, eight months ago, it was a growth market out there. And pretty much across all companies, growth was trumping profitability. But right now, we're looking at a variety of different profitability metrics. I'll turn over to Davis to talk to several of these that are probably more front and center to most companies, regardless whether you're big or small right now, frankly.