Benchmarking the quality of your benchmarks

"Spaceships don't come equipped with rearview mirrors"

Support for Mostly metrics comes from Brex, the AI-powered spend platform. Spend smarter with integrated cards, expenses, travel, and payments in 100+ countries.

“Spaceships don't come equipped with rearview mirrors”

-Int’l Player’s Anthem (I Choose You) by UGK ft OutKast

2023 was a lot of things for a lot of startups.

And if you followed the general benchmarks on how it went, you’d think every business is ready to leave it in the past, and never look back.

But before we write it off as a year to be forgotten, I’d be remise to point out that general benchmarks are a lot like general life advice - they generally suck, and I’d probably be an orthodontist in upstate New York if I’d listened.

(Lucky for you, I’m out here slingin’ CAC Payback Periods and making early early 2000’s hip hop references)

People are lazy. And that’s what makes general benchmarks so appealing - we outsource the analytical horsepower required to get to ground truths, without even knowing what car we’re driving.

Whenever I sit down with a benchmarking report, I always ask myself the following ten questions before I make any inferences.

---

You can use it yourself as a checklist of sorts:

1. What’s the relative company size we are looking at?

   1. Revenue

   2. Employees

2. What’s the primary sales motion these companies rely upon to sell their products?

   1. Field Sales

   2. PLG

   3. Sales Assisted

3. How are the products monetized?

   • Subscription (Recurring)

   • Consumption (Usage Based)

   • Hybrid (Mix and Match)

   • Transaction Based (Take Rate)

   • Advertising (Views)

4. What’s the industry or sector cut?

   1. Cyber

   2. Dev / Eng Tools

   3. Backoffice

   4. eCommerce

   5. Fintech…

5. What parts of the world are included?

   1. USA

   2. Europe

   3. Asia

6. Who’s the end consumer?

   1. B2B

   2. B2C

   3. B2B2C

   4. Government

7. What’s the segment of the end consumer?

   1. SMB

   2. Midmarket

   3. Enterprise

8. Is there any underlying seasonality I should be aware of?

   1. Back end vs front end loaded

   2. End consumer buying habits

9. What was the macro environment at the time of measurement?

   1. Access to capital

   2. Interest rates

   3. Inflation

   4. Government regulation

10. What’s sample size?

    1. What’s the “n”

---

That’s why it was refreshing to read Maxio’s latest benchmarking report, which reflects upon 2023 through the shared lenses of Billing Type, Industry, Size, and Region.

Armed with these views, here are my takeaways and predictions:

Across businesses with +$1M in revenue, Consumption models grew toplines faster than traditional Subscription

• Subscription companies failed to surpass the growth rates of their Consumption Based counterparts in every quarter of 2023

• “Consumption models have been perceived as at risk in a weaker demand environment, so the 2023 outperformance is notable” -

  SaaSletter

• I’ll eat my hat on this one - I was wrong - I thought in a shaky economy it would be much easier for companies to turn down the thermostat on usage based products, compared to iron-clad, annual SaaS setups

• What I didn’t anticipate was how resilient value based metrics would be in linking success to cost

When you start out, it’s easier to get to $1M on the backs of a Subscription based model than Usage

• You may have a better chance of success by deploying a Subscription invoicing model vs pure-play usage when you are trying to just get revenues off the ground

• This observation held true in Q4, as invoicing companies outpaced their consumption counterparts by an annualized growth of 33%.

However, the formula flips flips once you are going for scale

• After $1MM in ARR, Usage based companies get to $100M in revenues faster

• It’s crucial for founder’s to take a step back and consider the most advantageous pricing strategy for each stage of growth

• Consumption companies are better positioned to realize upside when the market is moving towards you and things are firing on all cylinders

Cyber defends the growth perimeter

• Cybersecurity proved most resilient with an average annualized growth rate of 37% through the last two years.

• However, it was also the most funded sector during that timeframe

• I predict there will be some softness in cyber in 2024, as CFOs push to consolidate on stalwarts like Palo Alto and Microsoft, and new funding in the sector dries out

Prop tech and Leisure tech are SO BACK

“Hey, yea, it’s me, did you see the benchmarking report? I think we’re back, baby!”

• Someone tell Adam Neumann it’s 2018 again!

• Prop Tech and Leisure Tech came back with a bang in 2023, with annualized growth rates of 25% and 29% respectively

• This is a good sign for the economy in general, as both of these sectors got Ctr Alt Deleted in 2021 and 2022

The South East of the United States is outperforming traditional tech hubs

• Say what!? The top performing region over the last eight quarters has been the Southeast, with an average growth rate of 21%

• “Go West, young man” was once the siren call for entrepreneurs

• But business is boomin’ in Florida Man’s backyard

So let’s crank the OutKast and get this show on the road. But before we do, instead of refusing to look backwards, we should ask ourselves if we are using the right mirrors in the first place. Best of luck in 2024.

A word from our sponsor - Brex

AI is everywhere in business, and even our merry gang of finance leaders can benefit.

Brex’s AI-powered spend platform takes the stuff no one likes doing — expense reports, reconciliation, answering T&E policy questions — and automates it all. I know what you’re thinking:

• Will people finally stay under budget? Yes, with Brex’s built-in controls.

• Nice. Can I fire my accounting team? No, don’t do that.

• Will it at least make them more productive? Now you’re talking.

The best part: Brex AI leaves us humans in charge. It’s simply our steadfast assistant that makes compliance, decision-making, and closing the books way easier. Check it out.

---

Run the Numbers

This week on Run the Numbers ya boy interviewed Hubspot’s SVP of Revenue Operations, Sid Kumar. We discussed:

• Designing effective commission plans

• Where should RevOps sit in the org?

• Do Spiffs actually work?

Don’t miss this masterclass in Go to Market Strategy.

• Spotify

• Apple

• YouTube

---

Quote I’ve been pondering

“You come at the king, you best not miss.”

-Omar Little, The Wire