Meetup Recap

Crucial SaaS Finance Metrics with Odoo CFO Alessandro Mazzocchetti

Faustine Rohr-Lacoste Spendesk

Every SaaS business has its critical metrics to measure. There are plenty of them, and CFOs are typically expected to track them all.

But that doesn’t mean you need to care about all SaaS metrics equally. Depending on your board, your industry, and your company stage, there are certain KPIs that deserve more attention.

In this live CFO Connect "Ask Me Anything" session, we talked to Alessandro Mazzochetti, CFO of Odoo, about the SaaS metrics and KPIs he really cares about, why internal hires are the best, and how he built an HR function that now hires more than 1,000 people per year.

Alessandro talked about:

Why CAC and LTV are far less important than churn
The “Rule of 40” for some venture capital firms
Why Excel can’t handle the data his team needs
How automation helps Odoo process tens of thousands of invoices each month
The secrets to hiring fast and maintaining a strong company culture

Rewatch the full AMA here.

About Alessandro

Alessandro lived his first life as a lawyer in the M&A environment for an American bank, and then switched to finance about 20 years ago, more or less. He has since worked in finance teams for Johnson Control, American Express, and Carmeuse (an industrial mining company that's in Belgium). These roles honed his skills to build and successfully run a finance department.

Alessandro then ran his own business which was sold successfully in 2015. He met Fabien Pinckaers, CEO and he founder of Odoo, and fell in love with the product and vision, and joined the team.

The most important KPIs in SaaS

“We pay particular attention to ARR (annual recurring revenue), growth churn per region, growth churn per channel - direct and indirect - and net dollar retention per customer and per region.

Honestly, I'm not really interested in CAC:LTV - although I do report it. But I don’t spend too much time on it because it's final LTV:CAC, but our investors are especially interested in these churn KPIs rather than CAC:LTV.

SaaS is a good business model if you can keep your customer and if you can grow your database. You can have good CAC, but if your churn is 35%, you’re dead.

And churn is complicated - very complicated - because there are so many different ways to calculate churn. It's a little bit more complicated, so I spend a lot more time on these indicators.

Company value is really based on churn. SaaS is a good business model if you can keep your customer and if you can grow your database. You can have good CAC, but if your churn is 35%, you’re dead.

You have to grow your database, And if your product is good, your clients stay with you, you’ll increase subscriptions.”

The “rule of 40” for SaaS companies

“This is a typical rule for KPIs from VCs in the US. And it reflects your capacity to finance the company. It's saying that the growth rate plus the profit margin should exceed 40%. That means, if you have a growth rate of 30% and a margin of -10%, you’re at 20, not 40.

It's something really emphasized by certain VCs. I wouldn’t say that they base a company’s valuation solely on this rule, but it’s a cherry on the cake.

Interestingly, in the market at the moment the reference isn’t the growth churn but net dollar retention. I don't know if everyone is familiar with net dollar retention, but in the next five or six years, it will really be the reference to evaluate a SaaS company.”

Why Excel isn’t enough to measure SaaS churn

We do sometimes use Excel, but the base is Odoo. Then I export data from Odoo to do the calculations.

The tricky thing with SaaS, especially for us, is that we have annual subscriptions and multi-year subscriptions, which are fine. But we also have a monthly subscription. When you calculate churn, you can’t do it correctly if you take into account the amount of subscriptions that opened in January and finished in March. Because the base is not the same. That's why it’s complicated to calculate churn on monthly subscriptions. You need a tool behind all that data.

You have to understand that we have 25,000 active contracts around the world, and the contracts are between 10 and 15 users. So we have 300,000 to 400,000 clients. And when I export to Excel, I might have 25,000 lines. You just can’t handle this only with Excel.

The main point is, you should aim to spend your time analyzing, and not putting Excel together. This is for me the base of the job. I'm too expensive for the company to spend all my time exporting lines into Excel. I prefer that the software does it for me, and I spend time on analysis.

Automating the invoicing process

We process between 10,000 and 15,000 invoices per month on accounts receivable. On accounts payable I would say 3,000 to 4,000 per month. That's why it's very important to have a good OCR tool to feed invoices into the system, and to invoice clients automatically.

I don't want an accountant to spend time on something that we can do with a machine. I want them spending time to improve the process, improve the workflow, to collect more money, to improve cash collection, to control costs.

We have some checks in place for the receivables. But you can imagine that 15,000 invoices per month is huge. It's a massive amount of work.

Then I try to digitize the process as much as possible. Again, Odoo gives us a lot of this digitalization. So it’s pretty easy for me.

A finance team that builds itself

When I joined Odoo in 2015 or early 2016, I came in as CFO. We had one accountant in Belgium, two admin staff, and three offices. There was one HR. But the turnover was €6 million and we had 140 people - 50% of those were developers.

Now I have 27 FTE in finance: 17 accountants, four controllers, five administrative staff, and the dream HR team of 25, to recruit 1,000 people per year.

I asked people to recruit their own colleagues, because I think smart people want to work with smart people.

How did we manage to do that? I apply a simple rule: I need very smart people. That's it.

Smart people with the right attitude can learn the skills they need. So when I recruited the first, second, and third accountants, I made sure that we had really, really smart people.

Then when I had these three or four people in place, I changed the rule. I asked people to recruit their own colleagues, because I think smart people want to work with smart people.

If I have to recruit a new controller, my two existing controllers seek out their new colleagues. They do interviews - they do everything -and then they present me two candidates, and at the end I choose.

Of course, the two candidates will also be very smart. So what’s important is the attitude - not the skill. Of course they know accounting and all the rest. But I prefer someone that is not 100% in accounting but has the right attitude. than the other way around. Because if they have a great attitude, they can learn the skills.

You can learn. You can read books, you can gain experience. You can use your brain to improve yourself.

Hire executives from within the business

When it’s time to appoint VPs and senior leaders, I prefer to look internally, for sure. That’s also a question of attitude and company culture. And at Odoo, we put a lot of emphasis on company culture. We usually think that someone from outside simply can’t fit within our culture.

I am the exception, of course, because I joined Odoo in 2015.

Senior people can be 35 years old - not always 50 or 55. They just need experience. And the rule is that if we need to promote someone to a VP role, for example, we’ll try to promote someone from inside.

The director in Hong Kong is 28 year old. In Dubai, it’s someone who has been in the company for 10 years. We have a guy that opened San Francisco when he was 29 or 30 and is still leading it.

We put this attention on internal hires because the company culture is the most important.

The key aims for the finance team

We make finance tools, but Odoo isn’t a finance company, and it isn’t trying to be. Odoo is first foremost a product company, because we’re selling a product. Which means that Finance isn’t driving the business. Finance is here to support.

I define myself as the architect of the value of the company. Every decision brings something positive or negative, and adds or removes value in the P&L (profit and loss sheet). My role is to challenge the CEO by saying, "this decision brings value to the company," and, "that decision destroys value in the company."

I define myself as the architect of the value of the company... My role is to challenge the CEO by saying, "this decision brings value to the company," or "that decision destroys value in the company.

So I'm a business partner, but you don't have to run the company based on finance. I'm challenging the CEO, but at the end of the day you sell a product, so you have to focus and concentrate on your product.

Everyone in Odoo receives two weeks’ product training program at the beginning. And then we all have 12 days of mandatory training during the year. Everyone knows the product very well - from finance, marketing, from all the sides of the company.

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