The 5 things Every SaaS CFO Should Know About Their Company’s Service Delivery
There are certain things that the CFO of a SaaS business should know about the service delivery aspects of the solution their company provides. This posting outlines five of the most important.
First, they should have a good understanding of the current gross margin of the service and any projects which are intended to improve margins. The biggest piece of the gross margin usually is the infrastructure cost and for both the gross margin and the infrastructure cost they should know what the industry averages and ideal ranges are for these numbers. Usually a gross margin of 75-85% is considered a good range. A good range for infrastructure as a percentage of revenue is usually 15-20%. Both of these numbers can be compared to survey numbers and gross margins can be compared to public SaaS companies. As part of the gross margin understanding the % of the available capacity is important to understand. If the service is using 50% of the capacity that is an important thing to know, however agreement on definition is important here since theoritical 100% usage of capacity may be very different than the practical 100% use of capacity.