About the Softletter Benchmark 53

We have completely revamped our Benchmark 50, now the Benchmark 53, to reflect the profound changes the software industry has undergone over the last several years. The profiled are now broken into eight segments that provide a representative overview of industry trends and performance.

The Softletter Benchmark 53 are all publicly-held companies and most of our basic business metrics are derived from documents these companies are legally required to provide to investors. When we believe circumstances warrant it, we do adjust these numbers to reflect financial reality.

Please note that in June we will update these numbers to include the 2015 numbers. The reason for not posting these numbers before is that a) a significant number of companies revise their initial 10-Ks soon after their release and b) because of fiscal year considerations, some 10-Ks are not available at the end of the calendar year.

General and Administrative (G&A) is not typically regarded as a critical metric but it does offer insights into an industry sector’s operational efficiency. G&A expenses normally include the salaries and staffs of the CEO, COO, and CFO, rent, connectivity costs, etc. These costs bend to gyrate and grow in good times and during a company’s startup phase, then tend to stabilize the longer a company stays in business.

Rapidly rising or high G&A during economic good times or periods of stability are often a sign of internal turbulence; during a recession, they can reflect internal inefficiency if a company can’t keep expenses under control. G&A expenditures are difficult to shrink because the price of power, SaaS and mobile application infrastructure, office space, supplies, and related items tend to invariably rise over time. Some costs may be beyond company control: because legal and accounting fees fall into this category, external events (such as changes in regulations) can have a major effect on G&A.

The best way to shrink G&A ratios is to be big. Large companies bring volume purchasing and local political clout to their negotiations, both of which can be important in bring G&A down. Tax abatements, special access to retail properties, waving of onerous zoning restrictions, deals on power purchases and similar deals can all assist in driving down expenditures.

One interesting point is that overall, our G&A ratios are much higher than several years ago. The reason is that our Benchmark companies are all much younger that of previous members, and the numbers reflect this.

General and Administrative 2013—2014, The Softletter Benchmark 53, Executive Summary