The Softletter Financial Handbook

The Softletter Financial Handbook

Purchase the Financial Handbook

New Edition Just Released!

The Softletter Financial Handbook, 8th Edition

 The Industry’s Most Cost Effective Source of SaaS and Software Business Benchmarks

OVERVIEW

Welcome to the latest edition of The Softletter Financial Handbook. Concentrated in its four hundred pages are thousands of business metrics, benchmarks, and in-depth analyses on key operations such as staffing and sales compensation. All these are vital to a company’s  operational success, but surprisingly, there are few cost effective sources for this type of information.

The Handbook fills this gap at a price thousands of dollars less than other alternatives. And now that SaaS, mobile, cloud computing, social networks and device independence have emerged as new opportunities for software entrepreneurs, issues of profitability, efficiency, and productivity are once again at the center of many companies’ concerns.

You’ll find more than just raw numbers in the Handbook. We’ve drawn on our network of senior executives and experts for a wealth of financial drilldowns, , tips and insights that will help you develop smarter management strategies. You could spend years collecting this kind of critical data. Or you can purchase The Softletter Financial Handbook—and gain instant access to an invaluable knowledge base.

REASONS TO BUY

SOFTLETTER BUSINESS BENCHMARKS AND METRICS

Softletter’s key business benchmarks are based on analyses of The Softletter Benchmark 53, a carefully chosen group of 53 publicly held companies broken down into the following cohorts:

  • Top 10 Lowest R&D Expenditures

    The Big Four (Microsoft, Google, Apple and Oracle)

  • SaaS Sales and Marketing (includes Salesforce, HubSpot, Marekto)
  • SaaS Enterprise (includes Workday, Zendesk, Demandware)
  • SaaS Verticals (includes Blackbaud, Callidus, Qualsys)
  • Mobile B2C (includes Electronic Arts, Fitbit, Zynga)
  • Mobile B2B (includes Intellichek, Perion, NQ Mobile)
  • Social Networking (includes LinkedIn, Facebook, Jive)
  • On-Premise (includes Autodesk, Progress, Symantec)

The vital business benchmarks The Softletter Financial Handbook provides include:

  • Revenue per Employee
  • Research and Development as a percentage of revenue
  • Sales and Marketing as a percentage of revenue
  • Operating Income
  • Operating Income per Employee
  • Return on Equity
  • General and Administrative as a percentage of revenue
  • Days Sales Outstanding

But that’s just the start. Other key metrics the Handbook covers:

  • Sales and marketing staffing

    SaaS Sales Compensation Metrics

  • OEM contracts
  • Software company staffing metrics
  • H-1B personnel Usage by software companies of H-1B
    (Softletter has the industry’s only stats on this topic)
  • And much more

SOFTWARE EXECUTIVE AND SALES PERSONNEL COMPENSATION

Among the compensation figures you’ll find in the Handbook are:

  • CEO compensation figures and analyses
  • CFO compensation figures and analyses
  • CTO compensation figures and analyses
  • Structuring a compensation plan for your sales force
  • SaaS sales force compensation and sales plan compensation metrics

VENTURE FINANCE AND MERGERS AND ACQUISITION

A sample of the challenges and topics highlighted are:

  • SaaS in the M&A arena
  • Evaluating the value of your company for an M&A event

    Product Manager Staffing

  • Calculating your company’s multiplier value
  • Creative finance tips
  • What Angel investors look for in startups
  • Why VCs aren’t interested in your business plan (at first)
  • Avoiding “haircuts”
  • Recapitalization and earnouts

OPERATIONS

Operational studies covered Include:

  • Non-recurring engineering pricing
  • Q&A as a percentage of budget
  • Shaun Russell Rocks SaaS Product Management Like It’s 1999
  • Building a balanced executive team
  • Business patents and pitfalls
  • Do you have the right number of employees?
  • A blueprint for building the virtual company
  • Creating a SaaS sales compensation plan
  • The SSAE 18 audit report process, service organization control (soc) reports assessment process

The Softletter Software Company Valuation Worksheet

FORMAT

Downloadable PDF only

PUBLICATION DATE

September, 2017

NUMBER OF PAGES

400

 

 

 

 

 

 

 

 

 

 

 

Read the Full TOC

METRICS & BENCHMARKS

Notes 3
About The Softletter Benchmark 53 14
Research and Development, 2014 – 2015, The Softletter Benchmark 53 18
Research and Development, 2014 – 2015 19
Research and Development, 2014 – 2015 Benchmark 53 Analysis 23
Chart, Top 10 Ten Lowest R&D Expenditures 24
Research and Development , 2013 – 2014 25
Return on Equity, 2014 – 2015, The Softletter Benchmark 53 29
Return on Equity, 2014 – 2015 30
Return on Equity, 2014 – 2015 Benchmark 53 Analysis 33
Chart, Top 10 Lowest ROE, 2014 – 2015 34
General and Administrative, 2014 – 2015, The Softletter Benchmark 53 35
General and Administrative, 2014 – 2015 36
General and Administrative, 2014 – 2015 Benchmark 53 Analysis 39
Chart, 10 Ten Lowest G&A Expenditures 40
Operating Income, 2014 – 2015, The Softletter Benchmark 53 41
Operating Income, 2014 – 2015 43
Operating Income, 2014 – 2015 Benchmark 53 Analysis 47
Chart, Lowest Ten Operating Income, 2014 – 2015 48
Revenue per Employee, 2014 – 2015, The Softletter Benchmark 53 49
Revenue per Employee, 2014 – 2015 50
Revenue per Employee 2014 – 2015 Benchmark 53 Analysis 54
Chart, Top Ten RPE, 2014 – 2015 56
Revenue per Employee, 2013 – 2014 57
Days Sales Outstanding , 2014 – 2015, The Softletter Benchmark 53 61
Days Sales Outstanding, 2014 – 2015 62
Days Sales Outstanding, 2014 – 2015 Benchmark 53 Analysis 66
Chart, Top Ten Highest DSO, 2014 – 2015 67
Chart, Top Ten Lowest DSO, 2014 -2015 68
Days Sales Outstanding, 2013 – 2014 69
Sales and Marketing, 2014 – 2015, The Softletter Benchmark 53 73
Sales and Marketing, 2014 – 2015 74
Sales and Marketing, 2014 – 2015 Benchmark 53 Analysis 77
Chart, Ten Lowest S&M Expenditures, 2104 – 2015 79
Operating Income per Employee, 2014 – 2015, The Softletter Benchmark 53 80
Operating Income per Employee, 2014 – 2015 81
Operating Income per Employee, 2014 – 2015 Benchmark 53 Analysis 84
Chart, Highest Operating Income Per Employee, 2014 – 2015 85
Operating Income per Employee, 2013 – 2014 86
Benchmarks: OEM Contracts 90
Benchmarks: Sales & Marketing Staffing 93
The Softletter Software Company Staffing Survey 97
Respondent Profiles and Company Demographics 98
Development stage of your company? 98
What is your company’s current gross revenue? 99
For how many years has your company been selling software products/systems? 100
What is your primary geographic market? 101
What is your company’s primary business model? 103
How many companies subscribe to your SaaS system? 104
How many active users of your mobile application do you have? 105
How many regular employees do you have? (Please include only personnel who are on your payroll) 106
Do you employ H-1B personnel? 107
On a yearly basis, what % of your entire employee base consists of H-1B employees? 108
For what positions are you most likely to recruit for H-1B personnel? 109
Please include all functional groups within your company for whom you recruit H-1B personnel. 110
Temporary Personnel Usage 111
Do you rely on temporary personnel to meet your staffing needs? 111
On a yearly basis, what % of your entire employee base consists of temporary employees? (This number should include “temps,” contractors, consultants, and freelancers. It should NOT include H-1B employees) 112
Please tell us your primary source of non-payroll personnel 113
Please tell us all the sources you rely on for non-payroll personnel 114
Staffing Allocation 115
Is your product development group staffed primarily by internal resources? Answer “Yes” even if your product development personnel are located out of your company’s HQ or home country but are considered company employees, not contractors 115
Is your sales group staffed primarily by internal resources? Answer “Yes” even if your sales personnel are located out of your company’s HQ or home country but are considered company employees, not contractors 116
Is your marketing communications group staffed primarily by internal resources? Answer “Yes” even if your marketing personnel are located out of your company’s HQ or home county but are considered company employees, not contractors 117
Is your product management group staffed primarily by internal resources? Answer “Yes” even if your product management personnel are located out of your company’s HQ or home county but are considered company employees, not contractors 118
Is your administrative group staffed primarily by internal resources? Answer “Yes” even if your administrative personnel are located out of your company’s HQ or home county but are considered company employees, not contractors 119
Please tell us all the sources you rely on for non-payroll personnel 120
Staffing Trends and Analysis 121

MERGERS, IPOS, AND VENTURE FINANCE 129

SaaS In The M&A Arena 130
Negotiating Your Non-Compete Agreement 131
Are You the Big Dog in Your Vertical Market Niche? 134
When Your Sector Starts to Consolidate 135
Not All Revenue Is Created Equal 136
Keeping Negotiations Secret 138
The Top Five Problems in Software Company Financials 140
Protecting Your Excess Cash 141
Working Capital—Its Role in Deal Negotiations 142
Capitalization of Software R&D Choices 143
The 10 Second “What is My Company Worth?” Valuation 144
The Softletter Software Company Valuation Worksheet 145
The Softletter 2017 Software Company Valuation Worksheet 147
Method Three: Peer Group Price/Earnings Ratio 147
Due Diligence: Get Ready to Meet the Buyer’s Every Request 151
Preparing for the Sale: The Documents 152
Developing Solid Financial Projections 153
Seller Beware—Outside Deal Funding Required 154
What is a Recapitalization? 155
M&A vs. IPO 156
Protecting Your IP from Outsider (or Insider) Claims When You Sell Your Company 157
What’s Your Company’s Value Multiplier? 158
Why Deals Fall Through 162
The 504b Option 164
What Drives Valuation Multiples? 166
The True Value of an M&A Advisor 167
Angel Investors 168
Legal Strategies: What to Expect and Who Pays 169
Earnouts: The Good, the Bad, and the Ugly 171
When to Dig In Your Heels During Negotiations 172
Preferred Shares: The Monster That Ate Your Deal 173
Strategic versus Financial Buyers 174
Representations and Warranties Insurance 176
Reps and Warranties: Vital to the Deal 177
Why All the Focus on EBITDA? 178
M &A: A Global Process 179
Accounting Problems: Don’t Let Them Stop Your Deal 180
Due Diligence Tips for Sellers 182
When is the Right Time to Sell? 184
If it Takes 8 Months to Sell, When Should I Begin Planning? 185
Exit Strategies: Think M&A 186
Is My Company Too Small to Sell? 187
The Ten Worst Things You Can Do When Selling Your Software Company 188
Getting a Deal Done: Spousal Approval 190
Deal Killers: What Wrecks Value 191
The Power of the Minority 192
Negotiation Tactics 193
Passive vs. Active Shareholders 194
How to Detect a Non-Negotiating Buyer 195
Types of Statements That Can Spoil a Deal 196
Escrow Provisions in M&A Transactions 197
Using Strawmen in M&A Negotiations 199
Tax Reduction Tactics When Selling Your Company 200
The Art of the Earnout 201
How to Structure an Installment Sale 202
How to Negotiate an Asset Sale 203
How to Sell a Small Services Company 204
How to Sell Your Company When Shareholders Dissent 205
What to Do When a Deal Falls Through 206
How to Hang Onto Employees Via a Sale 207
How to Deal With a Weak Balance Sheet 208
How to Keep a Secret 209
Working With International Buyers 210
What Do Financial Buyers Want? 211
What Do Strategic Buyers Look For? 212
On Negotiating a Technology License 213
How to Avoid “Haircuts” 214
The Role of Revenue Recognition 215
Checklist: The Letter of Intent 216
The Letter of Intent 217
The Sarbanes-Oxley Effect 218
How to Field an Unsolicited Offer 219
The Devil Is in the Deal Structure 220
Escrows and Holdbacks 221
Escrow Agreements in the Age of SaaS 222
The SaaS Escrow 223
The Marketing and Sales Benefits of SaaS Escrows 225
Why Restricted Stock Is Risky 227
How to Structure an Earnout 228
Entrepreneurship: “Burn Your Business Plan” 229
Why Angels Fear to Tread 231
Creative Financing Tips From the Experts 233
Where to Look for Money 233
How to Manage Investors 236
How to Build Better Business Plans 239
How to Structure the Deal 240
Advice from a Master Planner 242
An Insider’s Guide to Venture Capital Term Sheets 243

THE SOFTLETTER COMPENSATION SURVEYS AND REPORTS 246

The Softletter Benchmark 53 CEO Compensation Report, 2014 – 2015 248
The Softletter Privately-Held Software CEO Compensation Report, 2015 – 2016 250
The Softletter Benchmark 53 CFO Compensation Report, 2014 – 2015 252
The Softletter Privately-Held Software CFO Compensation Report, 2015 – 2016 254
The Softletter Benchmark 53 CTO Compensation Report, 2014 – 2015 256
The Softletter Privately-Held Software CTO Compensation Report, 2015 – 2016 259
How to Make Profit Sharing Work 261
How to Structure a Comp Plan 263
Climbing the Incentive Ladder 265
How to Structure a Sales Comp Plan 267
Key Summary Highlights from Softletter’s “SaaS Direct Sales Compensation and Efficiency” Survey 269
Company Profiles and Demographics 270
Company Development Stage 270
Company Revenues 270
What is the average revenue size of the companies who purchase your software and services? 271
Sales Force Organization and Basic Performance 271
Does your company have a separate sales team responsible for renewals? 271
On average, how long does it take for a new direct sales person to close their first sale? 272
Quota and Direct Sales Representative Compensation 273
What is the primary compensation method for your sales representatives? 274
What is the average yearly base salary of your direct sales representatives who are compensated via salary and incentive bonus (es)? 274
What is the average yearly base salary of your direct sales representatives who are compensated via a base salary and commission? 275
Please enter the average variable commission compensation paid to your direct sales commission-only representatives. 275
Are direct sales managers measured and rewarded based on meeting and exceeding direct sales targets? 276
What is the average variable commission compensation paid to your sales representatives who also receive a base salary? 276
What is the average yearly base salary of your direct sales representatives who are compensated via salary and incentive bonus (es)? 277
Sales Force Management and Compensation 277
What percentage of your total direct sales is achieved by the top performing 20% of your representatives? 277

OPERATIONS 279

Beyond SaaS: The Rise of the Device Independent Platform and the Portable Workspace 280
Valuing Options While Running the Compliance Gauntlet 293
Pricing and Value Approaches for Embedded Software 298
Non-Recurring Engineering 300
Minimizing Online Sales Fraud 303
Increasing QA Costs Squeeze Bottom Lines 305
Q&A as a Percentage of R&D Budget 305
Shaun Russell Rocks SaaS Product Management Like It’s 1999 307
Building a Balanced Executive Team 314
Business Process Patents: What Remains After Bilski 317
What’s Your Business Innovation IQ? 321
How to Survive Financial Peaks and Valleys 325
A Growth Strategy Roadmap 327
The Science of “Meaningful Marketing” 330
Six Rules for Sustained Success 332
Do You Have the Right Number of Employees? 335
How to Plan for Profits 337
How to Get Paid Faster 339
Cash Management: Who Gets Paid First? 341
How to Renegotiate a Lease 343
Pricing Strategies for Software Bundles 345
On Keeping Discounts Under Control 347
Eight Ways to Raise Prices 349
Channel Optimization: Are You Giving the Channel Too Much? 351
A Blueprint for Building the Virtual Company: A Review of The Invisible Organization by Mitch Russo 353
Advice from Mitch Russo on How a SaaS Agent Program Can Build Revenues for Your Company, Part I of II 356
Setting Sales Compensation in a SaaS Environment: A Practical Approach 364
Key Metrics: The Sales Pipeline 370
What’s Your Financial IQ? 372
The Moving Target of Software Sales Taxes 374
SSAE 18 (formerly SSAE 16/SAS 70) Audits 377
The SSAE 18 Audit Report Process, Service Organization Control (SOC) Reports Assessment Process 381
What Should Your SaaS SLA Look Like? And Should You Even Have One? 382
Collecting VAT on SaaS — What Rules Apply? 387
The Softletter SaaS Report: $599 393
The Softletter Direct Sales Compensation and Efficiency Report, $599 395
SaaS Entrepreneur: The Definitive Guide to Succeeding in Your Cloud Application Business, Second Edition, $49.99 396
In Search of Stupidity: Over Twenty Years of High-Tech Marketing Disasters, 2nd Edition, $24.95 397
Selling Steve Jobs’ Liver: A Story of Startups, Innovation, and Connectivity in the Clouds. Available on Amazon 398

 

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