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Why we care about culture as much as code

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June 18, 2021
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It’s easy for product experts to only get seen for their coding knowledge. But while you obviously want a product that’s technically brilliant, we bring more expertise to the table than what lies in our tech toolbox. Building to spec isn’t what we’re about. Instead, by bridging the gap between your business and the product we build, we help you achieve your wider objectives.

The thing is, when it comes to finding product experts to guide you through your startup journey, the people are every bit as important as what they can do. At T&F, we want to find the right personalities, accommodate different ways of working, and ultimately build the real relationships that make close collaboration possible.

We empower everyone to contribute

When we talk about the T&F team, we take the ‘team’ part seriously. We don’t want to limit developers by dictating how they should tackle a task. Instead, we have a flat structure where everyone can throw ideas around.

We’re not interested in siloing — innovation is everything in this industry, and sharing ideas across the team enables us to cheer each other on and push one another to be more inventive.

Developers have distinct roles on a project, but in our team itself no one is expected to stay in their lane. We want people to find the right place for them and their skills, so we make sure everyone can see every element of the process. And our culture is for anybody to get stuck in with solving any problem, whatever their role is within a project.

T&F is a unique melting pot of experience, and the best results always come when we pull our thinking together so that everyone can learn from each other. We love to push ourselves to work with new coding languages, frameworks and tools so that our horizons keep broadening - and so we can build what hasn’t been built before!

We also know that a lot of developers want to build a startup product of their own one day, and they’ll be among friends here. By being a part of what T&F is doing, seeing the entire startup product development process in action, we hope to give them all the skills and support base they need to be as successful as any of our clients.

We promote freedom

Trust holds us together as a team. Because we all work remotely, we give the benefit of the doubt that everyone is giving it their all and doing their best work for us. And in return for that high quality output, we offer our team the flexibility they need to have the lifestyle they deserve.

We care about getting work done more than prescriptive working hours. And while we have to make our routines fit the needs of the business, there is some leeway. So if a developer wants to start work at the crack of dawn, take a siesta, or cut down to three days a week to balance their family life, we’re open to having a conversation about it.

Theo with two dogs in a co-working space. Some people working in the background

At the end of the day, we just want everyone to be able to work in a way that maximises productivity and enjoyment. We expect people to be productive but we also have an unlimited holiday policy so high achievers can reward themselves after pushing to meet a goal. And because you can never quite predict what’s round the corner, we are reasonable when it comes to last-minute requests for time off.

For a lot of our team, flexibility means being able to devote time to building their own startup product. One of our developers recently did just that — they’d made a great proof of concept and wanted to focus on taking it to the next stage. So we all got behind it and gave them the advice they needed to go full speed ahead.

We want teammates, not employees

In his book Delivering Happiness, Zappos CEO Tony Hsieh talks about rebuilding his company’s culture after realising he didn’t know the people he was working with and wasn’t getting the job satisfaction he needed. We built T&F with his message in mind - we wanted to build our culture right the first time!

We’d had our fill of corporate development and wanted to do something different. We look to work with diverse people who offer different perspectives for all of us to learn from, a team who inspire each other through their passion, talent and friendship.

It’s no secret that software development isn’t the most interactive job in the world, so we try and bring everyone together as much as possible, even though many of us live countries apart.

Sometimes we’ll rent out a cottage for a project so we can all get stuck in together — and our dogs will likely come along too. Or we’ll break out from behind our desks completely with a hike or a snowboarding trip. We’re up for anything that will strengthen our sense of togetherness and tribe.

A team member in the mountain jumping with his skis on

Without really planning it, it turns out our team are all keen runners, cyclists and hikers. So over lockdown we set a team goal for us all to reach a certain distance together. Somehow that collaborative event became quite competitive!

But most of the time we keep development as a team sport: carrying the same vision, working towards the same goal and sharing the same passion to get there. What we create together is all the better because of it.

Interested in joining the Thought&Function team? Or looking to bring your startup idea to life? Get in touch to find out more.

1 - Prioritise new features / Address User Drop-Off

When you're running a SaaS company, deciding which features to roll out next can make or break your product's appeal. Additionally, understanding why users leave your SaaS platform can be as important as attracting them in the first place. By keeping an eye on KPIs like Churn Rate and Engagement Rate, you gain invaluable insights into what keeps users satisfied and what might be pushing them away. Let's look into some crucial KPIs which can guide you in making well-informed decisions about your next big feature update:

1. Feature Conversion Funnel:

This KPI measures how effectively users move from initial engagement to full use of a feature. It helps SaaS companies identify where users drop off, guiding improvements to enhance feature adoption and prioritising development efforts.

You can use the following formula to calculate this KPI:

Formula for calculating the conversion rate from Stage A to Stage B, defined as the number of users moving from Stage A to Stage B divided by the total users as Stage A.

2. User Engagement Rate:

For SaaS companies, engagement rate measures how actively users are interacting with the application. High engagement rates are often indicative of a valuable and sticky product, reducing the likelihood of user drop-off.

The calculation for this KPI can be done using this formula:

Formula for calculating user retention of a feature, based on the ratio of users still engaged with the feature after a specific period.

3. Customer Satisfaction:

This KPI measures how satisfied customers are with a product or feature, typically through surveys. High satisfaction rates correlate with lower churn and higher loyalty, making it essential for evaluating user experience and identifying areas for improvement in SaaS offerings.

The calculation for this KPI can be done using this formula:

Calculation of Net Promoter Score, subtracting the percentage of detractors from the percentage of promoters among surveyed customers.

2 - Accelerate User Growth

Growing a user base is one of the most exciting challenges in the SaaS world. It's not just about bringing in new sign-ups but ensuring they stick around and find real value in your product. We'll delve into effective SaaS KPIs like Monthly Active Users and the Growth Rate of New Signups that can help you craft strategies to not only attract more users but also engage them deeply:

1. Customer Acquisition Cost (CAC)

The CAC is a crucial KPI for SaaS companies, as it quantifies the cost involved in acquiring new customers. Understanding this metric is essential for evaluating the effectiveness of your marketing strategies and ensuring sustainable growth by maintaining a balance between expenditure and incoming revenue.

To find this KPI, use this formula:

Calculation of Customer Acquisition Cost, total marketing expenses divided by the number of new customers acquired.

2. Growth Rate of New Signups

This KPI tracks the percentage increase in user signups over a given period. It's particularly useful for SaaS businesses to monitor momentum in market penetration and user interest, helping to direct marketing efforts and product development.

This formula is used to calculate the KPI:

Calculation of Customer Acquisition Cost, total marketing expenses divided by the number of new customers acquired.

3. Monthly Active Users (MAU)

In the SaaS world, the MAU KPI measures the number of unique users who interact with your software within a month. This metric is vital as it indicates the active reach of your product and helps gauge the overall stickiness and appeal of your platform.

The following formula can be used to calculate this KPI:

Formula showing how to calculate Monthly Active Users, counting unique users engaging with the service within a month.

3 - Provide Product Metrics to Investors

Communicating effectively with investors is crucial for any SaaS business. Clear and precise metrics like Monthly Recurring Revenue (MRR) and Churn Rate not only showcase the financial health of your company but also reassure investors about the scalability and stability of your business model. Let's walk through the vital KPIs that paint a transparent picture of your SaaS company's performance for its stakeholders:

1. Monthly Recurring Revenue (MRR)

MRR is a key financial metric for any SaaS business, reflecting the total predictable revenue generated from customers every month. It's essential for investors as it provides a clear picture of the company’s financial health and growth potential.

Here’s the formula to calculate this KPI:

Formula for Monthly Recurring Revenue, summing up all recurring revenue generated by customers each month.

2. Churn Rate

Churn rate is an indispensable KPI for SaaS companies, indicating the percentage of customers who discontinue their subscriptions within a specific period. A lower churn rate suggests a higher customer satisfaction and product-market fit, which is critical for long-term success.

This is the formula for calculating the KPI:

Formula for calculating churn rate, represented as the percentage of customers lost over a specific time frame.

3. Lifetime Value (LTV)

LTV measures the total revenue a SaaS company can expect from a single customer throughout their relationship. This KPI is crucial for understanding how much a company should invest in acquiring customers and for determining the profitability of long-term business strategies.

Use this formula to find the KPI:

Equation for calculating customer lifetime value, which estimates the total revenue a business can expect from a single customer.

4 - Optimise Revenue Generation / Monetisation

Turning your SaaS platform into a robust revenue-generating machine requires more than just great software; it needs a smart monetisation strategy. By focusing on KPIs like Average Revenue Per User (ARPU) and Conversion Rates from Free to Paid, you can really dial in on what makes your users upgrade and how to boost your overall profitability. Let’s break down these KPIs and explore how you can use them to fine-tune your monetisation efforts for maximum impact:

1. Average Revenue Per User (ARPU)

ARPU is a critical financial KPI for SaaS businesses, measuring the revenue generated per user. It helps in assessing the revenue impact of different operational strategies and in fine-tuning pricing models.

Here's the formula you need to calculate this KPI:

Formula to calculate Average Revenue Per User, total revenue divided by the number of users.

2. Conversion Rate from Free to Paid

This metric tracks the percentage of users converting from free trial versions to paid subscriptions. For SaaS companies, a higher conversion rate indicates effective monetisation strategies and a compelling value proposition.

The following formula can be used to calculate this KPI:

Graph showing the conversion rate from free to paid users, calculated as the ratio of users who upgrade to a paid version.

3. Revenue Growth Rate

The revenue growth rate is an essential KPI for SaaS businesses, showcasing the rate at which the company's revenue is expanding. This KPI is vital for investors and stakeholders to assess the overall business growth and scaling capacity.

You can find this KPI using this formula:

Formula for calculating revenue growth rate, expressed as the percentage increase in revenue from one period to the next.

5 - Improve Business Resource Allocation and Strategy

Ensuring sustainable business growth and operational efficiency is paramount for any SaaS business. Key performance indicators (KPIs), such as the LTV:CAC ratio, provide a clear picture into the returns generated and optimal resource distribution. Let's dive into the KPIs that will help you strategically allocate resources, adjust marketing strategies, and effectively balance customer acquisition with retention:

1. Customer Lifetime Value to Customer Acquisition Cost Ratio (LTV:CAC)

The LTV:CAC ratio is a vital KPI in the SaaS industry, providing insight into the relationship between the lifetime value of a customer and the cost to acquire them. A healthy ratio indicates that a company is spending efficiently on customer acquisition while maximising revenue from each customer. The bigger the multiple, the more budget you can put into growing a team and customer growth.

To find the KPI, apply the following formula:

Formula showing the ratio of Lifetime Value (LTV) to Customer Acquisition Cost (CAC), a key indicator of the profitability of acquiring new customers.

2. Customer Acquisition Cost Payback Period

The Customer Acquisition Cost (CAC) Payback Period is a critical metric for SaaS businesses. It measures how long it takes to recover the costs of acquiring new customers, helping companies evaluate the efficiency of their marketing and sales efforts. A shorter payback period means a quicker return on investment, guiding better financial and strategic decisions.

This formula will help you calculate the KPI:

Formula to determine the payback period for customer acquisition costs, calculated by dividing CAC by monthly profits from a customer.

3. Market Penetration Rate

The Market Penetration Rate is essential for understanding a SaaS company's market impact. It measures the percentage of the total addressable market that the company has captured. This metric helps assess competitive position and growth opportunities, indicating how well the product is adopted in the market.

Use this method to calculate the KPI:

Formula for market penetration rate, shown as the percentage of potential customers in a market who are actual customers.

In wrapping up, it's clear that understanding and using KPIs effectively is vital for any SaaS business that wants to grow and thrive. By focusing on key metrics like Customer Acquisition Cost (CAC), Annual Recurring Revenue (ARR), and Lifetime Value (LTV), you can get a clear picture of how your business is doing and where you need to go. These KPIs aren't just numbers—they're powerful tools that help you and your team make smart decisions and reach your goals. By tracking the top three KPIs for each of your business objectives, you'll keep your SaaS company agile, competitive, and on the right track for growth.

Next Steps

If you're curious about how we apply these principles in real-world scenarios, we invite you to explore our projects. Visit Thought and Function Projects to see how we put theory into action and drive success in SaaS through strategic use of KPIs.