What about R&D?
That’s people. We don’t outsource R&D.
But you’ll have to hire to accommodate growth. How predictable is your growth?
With some roles I’m going to lean into the wind a little bit and hire ahead of the growth — salespeople, for instance. I’m going to hire them predicated on an assumption about how productive they’re going to be after a period of ramp-up. But yes, forecasting the revenue is the trickier piece of it.
So how do you do that?
I’m on the phone every day with our senior vice president of sales and his five area vice presidents, talking about deal flow. A budget is out of date about 10 seconds after you’ve done it, so I have a real-time forecasting thought process that’s based on how we’re tracking with our revenue.
We also do a lot of data analysis, and the next finance people I hire will be on the FP&A side. Right now we are evolving a pretty good predictive model of new sales staffers’ productivity.
What do you think is the key to good data analysis?
I feel that many CFOs get bogged down by trying to create pretty charts, graphs and dashboards. When you articulate the meaning of data to business leaders, of course it has to be in a format that is organized for their consumption. But for purposes of data analysis, perfection is the enemy of good. As long as I can extract the data, I don’t care how I get it. Somebody can scrawl it on a napkin in crayon, and I’ll take that data and use it to help shape the future of Sprinklr.
You talk to your sales leaders on the phone every day? That’s old technology!
Yes, and it’s an interruptive technology to me personally. But it’s not about me. It’s about making sure my area VPs can make real-time decisions when they’re with a customer negotiating a software deal. That’s the most important thing, and it’s about the velocity of our business.
I live by the motto “Today, not Tomorrow.” Call me on the phone. If I don’t get to an email within 30 minutes of receiving it, it’s below my view pane, never to be seen again. I pick up my phone every time it rings, if I’m not already on it.
What KPIs do you pay most attention to?
Head count, revenue-to-head-count ratio, growth vs. customer acquisition costs, and customer churn. The revenue-to-head-count ratio speaks to the scale of the organization and its ability to grow. We benchmark ourselves against other peer SaaS companies. We’re a bit more immature than the ones we benchmark against, so it’s somewhat of a harsh metric to look at. But we do so because it’s aspirational in nature.
For a SaaS company, churn and customer acquisition costs are huge. If it costs me 50 cents to acquire $1, I’m going to do that all day every day. If it costs me $1, I’m going to do that all day every day too, because I have to assume that my customer life cycle is going to be at least three years and probably more. If it costs me $1 today to acquire a dollar of business, that dollar is going to come back in years two and three and hopefully beyond. If you have a lot of churn, then your investment in acquiring new dollars is flowing back out the door.