This week we welcomed Scott Buxton, VP of Finance at Datadog, onto the show to discuss Customer Lifetime Value: how to calculate it and how to most effectively use it to manage a SaaS business. Scott currently serves as VP of Finance at Datadog, where he makes active use of CLTV and a range of other SaaS metrics. Datadog is a platform for cloud infrastructure monitoring. Before that, Scott spent nearly 3 years in finance at Github, where he gained exposure to the metric from a different angle. He began his career at Deloitte, where he spent 10 years working with a wide range of businesses. As an experienced leader in startup finance, Scott has seen the benefits and pitfalls of working with Customer Lifetime Value. He opined on CLTV and other SaaS finance metrics at Bowery Capital’s recent CFO Summit, joining a panel on “Leading Indicators & Customer-Level Finance” alongside InsightSquared CEO Fred Shilmover and Rishi Khanna, the former President of Novus. We hope you’ll tune into this episode of the Bowery Capital Startup Sales Podcast to hear him expand on those insights, and learn his tactics for leveraging CLTV to better strategically plan growth and spend in a SaaS startup environment. Please also keep an eye out for a follow-up article next week digging into Customer Lifetime Value and the various ways one can calculate the metric.
In today’s episode, Scott touches on his experience using CLTV in his current and past roles, sharing his thoughts on how to best put the metric to work operationally. Customer Lifetime Value (CLTV or CLV) is a critically important concept for subscription businesses of all stripes. It seeks to capture the full value (usually some variant of revenue) that an account will deliver over its lifetime as a customer. In addition to price point (usually included as ARPA, or average revenue per account), the key variable in calculating Customer Lifetime Value is churn. Accurate measurement of the likely time period you will be able to retain an account, in addition to the likelihood / pace of any upsells in the meantime, is the cornerstone of an effective CLTV. Armed with a thoughtfully calibrated CLV, you can gauge acceptable levels of upfront investment in acquiring customers (CAC), including spend on sales, marketing and customer success. This episode will cover other nuances of CLTV calculation and Scott’s own tips on how to turn this conceptual measure into a powerful strategic tool.
If you liked “Mastering Customer Lifetime Value” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog. If you haven’t already, subscribe to the podcast to get all our new content each week!