Painting a ROSE-y Picture
Welcome to another edition of the Weekly Financial Digest!
Each week, the team here at Lola bookmarks our favorite articles about corporate finance. Then, we take those and summarize them for you.
This week, we're featuring content about failed IPOs, pricing optimization, why finance should lead sustainability efforts, and more!
Enough with the intro, time to dive into the best content from the past week...
Looking at Failed IPOs in the Age of the Unicorn
The number of companies going public through an IPO peaked in 1999, with 486 companies IPOing. Since then, the number has dropped drastically. In 2018, there were only 190 IPOs. That’s nearly 300 fewer IPOs.
2019 seems to be a different story, though. There have been a number of high-profile IPOs this year. Some have been very successful, like Beyond Meat, which was named the best performing asset of 2019.
Others, like Uber, have been massive flops. Uber’s IPO was one of the worst performers in recent history.
IPOs are expensive and risky. So why do companies still do it? Is the direct offering approach that Slack and Spotify took a better strategy?
You’ll have to read the answers to those questions in the Toptal article.
The Platform And The Swarm: Strategy For Continuous Finance Innovation
If there’s one thing about financial transformation and innovation that you should know, it’s that innovation never ends. It can’t ever be a case of, “we innovated, we’re done.”
Innovation, especially in finance, needs to be continuous.
One way to make sure you’re continuously innovating is to focus on the customer. Improving the customer experience is a never ending cycle. If you make customer-experience part of your approach to finance, you’ll never stop innovating as a result.
Think about all the ways finance indirectly interacts with the customer. For example, you’ve got pricing, quote creation, deal approvals, cross-border tax calculations, order booking, revenue recognition, etc.
Making those steps better for the customer will help you innovate as a department.
Get the full scoop on this topic from Digitalist.
The ROSE Metric | The Return on Your Most Important SaaS Asset
The SaaS CFO is introducing us to a new metric today: ROSE. This metric is focused on finding your organizational efficiency. It basically shines a light on your most important asset: your employees.
This number is more complex than revenue per employee, and it’s actually not supposed to help you slim down your workforce. It should do the opposite, in fact.
To calculate the ROSE metric, divide your recurring revenue by employee related expenses. This returns $X number of recurring revenue dollars generated for every one dollar of employee expense (i.e. investment).
This isn’t just a one-and-done calculation though. This number becomes more useful the longer you track it. So start now.
Keep reading about ROSE (and see examples of it in action) on The SaaS CFO’s blog.
Why Finance Should Lead Sustainability Efforts
Sustainability matters for businesses’ bottom lines. In fact, over 90% of CEOs think sustainability is important to their company’s success.
CFO.com is making the argument that sustainability should actually start with the finance team. CFOs have the opportunity to be trendsetters here because they have the ability to show how sustainability efforts can positively affect their companies’ bottom lines.
What’s better is that sustainability doesn’t have to cause an increase in costs. As an example, Caesars Entertainment implemented a “CodeGreen” strategy that analyzes utility data to identify areas of misuse in water, energy, and waste consumption.
That program reduced water consumption by 11% and energy usage by 15% at Caesars.
If sustainability is something you’re focused on, read the rest of this one from CFO.
Why You Can’t Afford to Overlook Optimizing Your Pricing
We talked a little bit about SaaS pricing last week, and we’re covering it again because it’s such a big topic.
Profitwell discovered that most companies spend less than 10 hours per year on pricing, which is not enough. They suggest that while many companies are on the right track with their pricing, there’s still room for optimization.
To optimize your pricing, you need information from:
- Customer survey data
- Demographic and psychographic data
- Historic sales data
- Operating costs
- And more…
And don’t forget, not only do you need to optimize your base price, you also need to spend time optimizing your promotional pricing and your discounted pricing. That way, if you need to offer a discount to close a deal, you’ll have the ability to quickly do it in a way that makes sense for your bottom line.
Learn how to optimize your pricing from Profitwell.
Although WeWork’s IPO isn’t coming this month, we’re still looking forward to it. Crunchbase is too, which is why they spent some time analyzing WeWork’s acquisition strategy. This strategy is likely going to play a role into the company’s IPO.
Although WeWork isn’t a software company, they’re certainly acquiring a lot of software companies. They’ve acquired more than a half dozen software companies to date. Crunchbase thinks this strategy is because WeWork doesn’t have the margin potential and growth of a healthy SaaS company. So, they may be trying to paint a rosy picture for IPO investors.
We’ll find out when they release their S-1. In the meantime, read the rest of this article from Crunchbase.