If two R’s is good, three is better. A new SaaS metric: Monthly Recurring Revenue Ramped (MRRR)
three is better than two but with both, you are really cooking with gas
First Round portfolio company Click Equations is a classic SaaS business. They offer complete search engine marketing platform that offers management, bidding, and reporting. The management team has well worn copies of Bessemer’s being sassy (PDF) on their desks. The service they provide optimizes a critical piece of the customer’s marketing mix and is often tested, trialed and then ramped up to a feature rich implementation against the full search spend of each customer.
Often initial deals do represent monthly recurring revenue, but they do not represent the full MRR potential for an account. This discrepancy between MRR and the total MRR opportunity at an account can make it difficult to reconcile sales and service priorities and can limit a CEO’s ability to get an accurate picture of the business.
What about deals that close on one date, but need time to implement? Are you accounting for implementation risk? What about deals that close as tests or where the current monthly revenue number represents only a small portion of the full revenue potential of the customer? Do you prioritize these accounts based on their current state or their potential? Do you discount the potential by some probability weight?
Depending on the level of customization you are offering and the complexity of the software tools you have created, it may take your support team some time to roll out the service that your customers need. It may also take some time for your customers to figure out how to utilize the tools you have created and see the full power of your platform — delaying the effectiveness of sales time for follow-up and up sell.
If you evaluate the MRR in the pipeline based on full implementations, not trials or tests you will over project and under close. If you project based on the MRR initially available from specific accounts, you may under service an account and miss a larger opportunity to scale an existing customer as you prospect for incremental accounts.
To bring transparency to this piece of the business, the team at Click Equations started tracking MRRR (Monthly Recurring Revenue Ramped). This represents the full MRR potential of an account assuming integration is complete and a full implementation across the business. Comparing this measure to current MRR highlights the revenue gap over time. Implementation of MRRR allows evaluation of the time to close the revenue gap, throws up a red flag if the gap gets larger and aligns workflows across the organization with a single prioritization lens.
Monthly Recurring Revenue Ramped worked for Click Equations and I hope it is helpful to you if you are running a SaaS business.
(Thanks to Lucinda, Craig and the rest of the CE team for letting me post this here and for coming up with this addition to the SaaS dashboard)