Diving deep into B2B SaaS metrics with Alka Tandan, CFO at Gainsight

Episode Description

In this episode of Diving Deep, Subscript's CEO, Sidharth, has an engaging conversation with Alka Tandan, CFO at Gainsight.

Sidharth and Alka go deep into B2B SaaS metrics as they discuss:

The one metric to stay hyper-focused on during a challenging economy
The key levers for increasing NRR in a B2B SaaS business
Why you should double down on Customer Success when times are tough
The benefits of partnering with a top-tier private equity firm
And more!

Show Notes

Follow Sidharth: https://www.linkedin.com/in/sidharthkakkar/

Follow Alka: https://www.linkedin.com/in/alkatandan/

Follow Subscript: https://www.linkedin.com/company/subscript/

About Diving Deep with Subscript

Diving Deep with Subscript is a video series where we dive deep and explore SaaS metrics with leading investors, CEOs, and finance leaders.

Watch the entire series of Diving Deep with Subscript

Get caught up on the entire series right here: https://www.subscript.com/diving-deep

Episode Transcript

Sidharth Kakkar
Thanks so much for doing this with us. And the thing that I would love to start off with is when it comes to thinking about Gainsight and the metrics that matter most for you as a business. What are the things that you're most religiously tracking, like the things you care the most about?

Alka Tandan
Yeah, well, it's an interesting time in the economy because things are moving so fast. I'm finding the emphasis is changing, but the core metrics are still the same. So in the last, I would say, almost ten years, as some of your audience might know, everyone's been really hyper focused on revenue growth and top line, because that's how companies were simply valued. So, of course, revenue, ARR, particularly growth in both, is super important. And then also along with top line, GRR and NRR are ones that we're just hyper focused on. So GRR, for the people that don't know, it basically measures how well you're doing with your current customer base and the ones that are staying, the ones that are leaving. And then NRR is one that we kind of look at as sort of like, really the health of your business. And I would say in the current economy, people are kind of shifting to a real hyper focus on NRR. In particular. We just had there was a McKinsey report that just came out that said valuation is highly correlated to NRR, which is great for Gainsight's business as well, because Gainsight helps with NRR.

Alka Tandan
And then besides those, actually, if you look at the valuations right now, investors are really looking at free cash flow. So that's one that we're really looking at. And what helps keep free cash flow is having an efficient business. So we're looking at CAC payback period, and I'm hearing that a lot from investors these days. So really hyper focused on that, which essentially shows the efficiency of your marketing dollars. And we're also looking at Rule of 40, which, as we're understanding, is very quickly shifting to more of a rule of 50 and even a rule of 60. So those are the ones we track religiously for our company. But I would also say it's really important also to just keep a pulse on the market and what investors are saying to you, because they're moving very rapidly.

Sidharth Kakkar
I really love the sort of breakdown, especially as you think about free cash flow matters. But then what are the components that drive free cash flow. That's so good. Do you have a feeling on what ends up mattering more to build a more successful business? Is it that GRR component, the NRR component? Or is this like a do you reject the premise of this question?

Alka Tandan
I do not reject it. Look, I think ultimately, I think it's NRR. And I think even as we're looking at our business and we're even looking at our customers businesses, we're seeing this shift. And the reason is essentially, as we all, as most of us know, it's a lot cheaper to keep and grow your customers than to get new customers. And so as we get into investors are demanding a more sort of efficient business, NRR becomes super key because the more and more you can grow your customers and grow with them, then it's good for you. So I do think as we continue to sort of as we look at the economy, but even before I think there's this huge shift into NRR.

Sidharth Kakkar
I have an extremely wonky question. So I'm curious how you think about this. We've come across a couple of folks who we work with who are starting to think about not just payback period for new business, but then also thinking about what they're spending to generate upsells in their business, especially if that can be a pretty significant amount. And there's always this little bit of confusion being like is customer success and account management, does that just roll up entirely into your cogs? Does it go somewhere else? How do you think about the efficiency of your business, especially as a CFO of a company that focuses on customer success and retention. I'm curious what your perspective on this is.

Alka Tandan
We think about this a lot and we get this question a lot. Should it be cogs or should it be sort of an opex? And I think the cogs theory is sort of a throwback of it to support because support is usually in the cogs line and we think of customer success, of course, very differently. Customer success for us is basically very strategic and so we actually look at it as an opex and we do actually put it in our CAC payback. And so of course that sort of changes that metric. But we actually do see it more aligned like with our sales force, because we have customer success is really focused on helping our customers get more strategic and more efficient and that also ties into our renewal team as well as upsell. So yeah, we put it in opex and we think that's where it should be.

Sidharth Kakkar
That's super fascinating. So I really appreciate that because you are very much the expert on this. And then the related question then would be like, do you look at any other business health metrics that are specifically tied to expansion or upsell revenue or is that sort of more part of the same core metrics that you're already looking at or is there something special you do?

Alka Tandan
Well, I think that's probably just related to how we look at customer success in general and how we look at the team. So we definitely look at, of course, GRR. And actually the team is actually their main North Star metric is GRR. And that is a conversation we're constantly having, like should their core North Star metric be on NRR, but underneath it is a lot more so for example, our product calculates customer health scores. And underneath customer health scores are a variety of metrics. So things like product use, the breadth of product use, the number of upsells, the number of renewals, even things like invoice history and many more. And so we rank all those and you come up with sort of a customer health score. And so that is, I would say, like another metric that we're kind of looking at constantly, what's the average customer health score as well as how we look at CSM, like what are their customer health scores specifically? So that's definitely one. We're also now sort of focused on what we call customer success qualified leads. So instead of just a sales qualified lead, we have CSQL. And so we're looking at those and how many CSQLs are sort of coming out of the team as well.

Alka Tandan
And then to your point, we are also hyper focused on just expansions and upsells and we've got Renewal Center within Gainsight. So every CSM is looking at those religiously every day we track that sort of as well. That's how we're kind of looking at it definitely goes much deeper to see what rolls up to both of those metrics.

Sidharth Kakkar
If the CSQL is what I think it is, I really love the concept, but I'd rather than put words in your mouth, I'd love for you to expand on that a little bit more.

Alka Tandan
Yeah, so you might be familiar with sales qualified leads. Those are leads that come in through marketing that sales have sort of accepted. And a CSQL is just that, they're leads that basically come from customer success. We want to give credit basically now to the customer success team. So that's what it is. And so yeah, we track those now as well.

Sidharth Kakkar
And how do you think about those from a finance perspective? Because I'm sure you think a lot about sort of your cost per lead that you're generating either from marketing or SDRs or whatever. But how do you think about the CSQLs and relative to those?

Alka Tandan
Well, for us, I want to make sure actually now we might need to add it a bit, but yeah, make sure I answer your question. But for us in CS is part of CAC, all that cost is actually part of the CAC payback period. So all of the CSM cost will be part of that. So for us it's another source for that. We don't have to however, in some ways is actually probably a cheaper source because we're not actually putting like marketing lead gen dollars. So it is actually a more efficient source of leads. And so again, something that's why we think companies just focus on it more.

Sidharth Kakkar
It's so great. I mean, I've never actually heard the term CSQL, but I know a lot of folks focus on referrals and I feel like it's aligned in so many ways. It's like cheaper, but it also indicates that you're serving your customers? Well, that's why it's the referrals, right? I'm assuming.

Alka Tandan
Yes, exactly. So it is something that we are talking a lot about more these days.

Sidharth Kakkar
Yeah. Do you then in payback include sort of upsells and expansions as well? It's not just new business.

Alka Tandan
So we actually are looking mostly at new business. But I think you bring up a good point. I think it would be a good idea to actually look at it probably both ways. I think the industry standard is mostly just look at new business. But as we're going to say that this has become a much more important concept and I think it will just given where investors want to head, I think we would probably want to look at it both ways.

Sidharth Kakkar
Yeah. As a leadership team, what are your sort of rituals around metrics? Like when are you looking at them, what are you focusing on? How are you digging into them?

Alka Tandan
Yeah, cadence is so important because on the one hand you could spend a ton of time looking just at numbers, but you just want to make sure, especially as a management team, that you're looking at things actually efficiently and you're looking at the right numbers. So I think I would say first of all, we have a really great BizOps team that spends a lot of time and is constantly reviewing the cadence. Like is this working? Are we being efficient with our time and are we looking for the right things and are they actually actionable, are we making decisions around it and is it effective? Because ideally you want to get ahead of things. So I think that's one thing, you just need people to be thinking about it constantly. So what has worked really well for us is first of all, we have a dashboard and the dashboard actually goes to the board fairly regularly like every other week. But we also sort of use it as sort of just a flash. That's where the business is going. And then we actually have a weekly business review that goes a lot deeper and we do spend every week first thing Monday looking at metrics and just understanding sort of where the business is and the leaders sort of go through it every week.

Alka Tandan
And then we have a quarterly business review where we spend actually about two to three days depending on the quarter, looking back, looking forward, seeing what worked, didn't work, and then creating actions around it. So that's sort of the cadence that seems to work with us the best, but we're reviewing it on a regular basis.

Sidharth Kakkar
Can you dig into a little bit more in terms of I'm thinking about metrics in three broad categories, sort of like the go to market metrics, like leads and deals and opportunities and all that stuff. The sort of customer health metrics which is obviously like the bread and butter from Gainsight. And then the third category being sort of like more SaaS metrics, retention rates and upsells and churn and all that. Is it like all three of these and all of them? Is it different ones at different times or does the importance change depending on where in the year quarter you are? Curious how you think about that category separately.

Alka Tandan
Yeah, we actually look at them all on a very regular basis. I think the difference is it just depends if we think an item is red, yellow or green and then we might actually just dig way deeper. So, for example, we're looking at NRR. We do usually look at average customer health on a weekly basis. However, let's suppose customer health, for example, is one that isn't for whatever reason it feels off. Then we will actually go and deep dive and look at what's behind that and look at some of the things that I sort of talked about, like product usage, product breath, and look at those items and dig a little deeper and see kind of like what's going on.

Sidharth Kakkar
Oh, that's smart. It seems like the industry is changing a lot in terms of the relationship between finance teams and data teams. What does that relationship look like at Gainsight?

Alka Tandan
Yeah, so we have a great finance team. So first of all, let me say that no, we do, I believe it. Yeah, we do. And we have a centralized data team as well. And so we are working very closely with them. And so although they sort of own the data, we're heavily involved and then we do also usually and within the data team are basically individuals who just essentially just like an FP&A team sort of focus on their business partners and so they focus on specific people. The way we kind of operate right now is although they're pulling a lot of the data, these individuals finance ends up being a bit of a check because especially since the Ops team is always very deep into the numbers and the teams are always deep in the numbers, we sort of provide the sanity check and the extra pair of eyes. It's a really great, I would say a symbiotic relationship. And so you always know it's working when finance is actually called to the table instead of pushing their way in and we're often sort of called to the table. So it works really well.

Sidharth Kakkar
That's very cool. When it comes to things like subscription metrics, is that still sort of a collaboration between the finance and the data team? Is that more of within the land of finance only? And then what are some of the sort of hardest parts of getting that rate?

Alka Tandan
Yeah, so when we're saying SaaS metrics, you're talking about GRR, NRR, just so I'm clear.

Sidharth Kakkar
Yeah, stuff like that. And payback period.

Alka Tandan
Yeah, it depends. I would say the ownership of GRR still sits with CS, but they calculated with finances help and then we're very much in it with them in the model so we're definitely like a check. So it's really both of us. But I think for things, when it comes to actually calculations like NRR and CAC, it's mostly finance. It's mostly finance taking the inputs and we're actually sort of calculating them. So it depends. To your point, I think some of the challenges and I think we've gotten a lot better about this as we matured as a company. But I would say when we were younger, definitions were something that we had to work on because we did have situations where teams were calculating something one way, we were calculating things another way, and then we would get into a meeting and not always sort of be aligned. And oftentimes the reasons made sense. So one example is like for the SDR group, we'll have leads and then the AEs will have leads and the SDR team is just showing their own leads, but we need to see the full picture. So oftentimes it made complete sense, but just getting really aligned on what we needed to see as a team.

Alka Tandan
So I would say definitions is definitely one, ownership I think is another. So if one person owns it and then the accessibility of that information, I would say is another because oftentimes many teams need to have access to that information to make sure we're all on the same page. And then I think we talked about just ensuring that we have the proper cadence, which took some time and we continued to refine as we sort of get bigger.

Sidharth Kakkar
Super cool. A lot of companies think of like metrics, especially SaaS metrics and business metrics, as just a thing that they do during fundraises or for board meetings, but not necessarily something they use operationally. But it's clear that you really focus on your leadership team and you've really run the company based on this stuff. What's sort of your pitch for like this is how you should be operating, not just this is how you should be reporting.

Alka Tandan
Yeah, well, I think for one, it's very natural for all teams to be hyper focused on their departments. So CTO is going to focus on R&D and R&D cost. It's just natural and can get really into the details and just hyper focus on what they need to do. I think as a leadership team, it's really great to get everybody aligned on sort of the big picture and what we're sort of all here to do, which is run a great company, give a great return for investors and really for all of us and do well by our customers as well as well as our employees. So we have this success for all, which is something we're really focused on. So I think getting everybody just sort of the big picture and making sure we're sort of all aligned on that, I think is really important. I think the other thing is these metrics and probably the biggest point is that these metrics kind of touch every department and so making sure that everybody's sort of aligned on that I think is important. So, for example, for NRR, it starts with, of course, sales and getting the right deal on the table and agreeing on what's going to get delivered.

Alka Tandan
And then it requires very successful onboarding from the professional services team. Then it also requires ongoing support with the support team and then of course, successful customer success management and then continued advancement from the R&D team. So it touches invoicing from the finance team. It touches everybody. And so I think that's actually the other main reason.

Sidharth Kakkar
I really like that. I have another wonky question this time about professional services. How do you think about professional services as either part of CAC? Not part of CAC, just part of COGS, and then especially when it comes to pilots and sales engineering type of stuff. Curious how you think about that.

Alka Tandan
Yeah, we still believe that it's more aligned with COGS that is very directly related to basically a sale. And this is yet another debate. I've seen it happen a lot and I've seen a lot of times that talked about even just cost relief and shadow P&Ls. But I think the industry has spoken and I think for most people, most of the time, in rare circumstance, unless there might be some rare circumstances, most of this actually does sit in COGS. And so we do that as well and we watch it. That one we watch religiously as well.

Sidharth Kakkar
For sure, yeah, makes total sense. Obviously. Gainsight is one of the pioneers in customer success. So I'm really curious to get your take on a couple of things. How do you think about measuring whether a customer success team is having or the type and quality and magnitude of impact that a customer success team is having on the business? How do you think about measuring?

Alka Tandan
Yeah, it might be a little repetitive, but we mostly look at GRR for the time being. I mean, that's really the metric. When we look at customers as a whole, we're looking at GRR. However, it's shifting. It's shifting and it's something we talked about a lot and we think it's shifting towards NRR. And we were thinking about this even before the current economy. But because the customer success team has such a huge part in upsells as well as cross sells. Which is also going to become I think more important as well as I think just the entire industry shifting that way. As well as valuation shifting that way. I think more and more we're going to be thinking and moving towards that. And then I think underneath that, it's sort of like we talked a little bit, talked about our things like customer health scores as well as CSQLs and all those other items.

Sidharth Kakkar
For companies that, for example, aren't happy with their GRR/NRR where does your mind first go? To like, here's the levers that I would first look at.

Alka Tandan
Well, you know, I think you need to have a great customer success team and a great piece of software for sure. I've heard Gainsight's really good.

Sidharth Kakkar
Me too. Yes.

Alka Tandan
But seriously, it's interesting. We did a survey of investors recently as well as CEOs, and we asked them this current economic environment, where are you looking at cutting? And customer success is actually at the bottom of it, which is interesting. And recently there was a Bain report that came out that actually said everyone should be double downing on customer success. There you go. A third party has sort of said it and people are looking there because of course, it is the most efficient way to sort of grow in an environment like this. It's so important. So that being said, why? Well, customer success really works well when they are strategic consultants in the business. So they're really in it with our customers, understanding where the business is going and providing sort of guidance in that way. And I would say an environment like that, it's probably the most important thing. And then I think also just providing alignment between groups. So as we discuss making sure onboarding goes well. Making sure R&D pipeline sort of matches where the customers are sort of saying as well. And then ensuring also that they're the right incentives for the sales team as well as customer success and making sure that alignment really is very closely sort of tied because ultimately that's where people will sales teams and CS teams will focus their attention on.

Alka Tandan
So I think those are some of the key levers.

Sidharth Kakkar
I really like that. You mentioned the sort of like current economic conditions and recordings in July 2022 and it's a tough time for a lot of subscription or SaaS companies. You mentioned that it's moved a little bit or it's like refocused you a little bit more on certain metrics as opposed to others. And I'm curious as far as, like, actual decisions that you're making right now, has it impacted anything or what kind of things are you thinking about little differently than you were, I don't know, six months ago?

Alka Tandan
Well, I think, first of all, every finance team, if you're not doing now, I think most are, but if you are, is really looking at the second half of the year, really taking a look at hiring. So we're hearing that a lot from people across the board and reviewing what we really need to hire for was crucial. And then I think everybody's looking at the top three expenses and taking a look at that and seeing where things could be moved, even things like T&E and how can we be more conscious of T&E and be really responsible with it? And that's usually like, how we like to go, instead of saying, okay, well, there's going to be a hiring freeze or here's a cut. So a lot of it is just getting really responsible conscious. And I think we're back to scenario planning. And I think we saw this during the COVID days as well. So really looking at different scenarios and just being prepared and just getting sort of ahead of it. So I think that those are things that we're sort of doing in terms of metrics. I think, like, we've been sort of discussing renewed focus on NRR, renewed focus on free cash flow, renewed focus on CAC payback.

Alka Tandan
So it's the return of not only do we want to see you grow, but we want to see an efficient business. That's what it's really about at the end of the day. And those are usually the metrics that really kind of can demonstrate that, and that's what investors are asking for.

Sidharth Kakkar
Yes, I'm really curious about the scenario planning. A lot of our audiences like companies that are a little bit earlier, obviously, than that. They're like series B, C, D companies, so still with impressive finance leaders, but not nearly as sophisticated as y'all. So I'm really curious how you think about scenario planning, which I think pretty much everyone's mind at this point, because what you planned for H2 of this year, at the beginning of the year, you're thinking it might look like it has to be different. So I'm curious, what does that functionally look like for you all?

Alka Tandan
Yeah, well, it all starts with bookings at the end of the day, so it's having a really candid conversation, I think, with sales and doing a lot of capacity planning and basically looking at, okay, we have planned right, and that will definitely be one scenario, and where do we think the economy should go a little bit lower? Where do we think sales will be? And usually I like to see three scenarios, so I want to see the worst case. I want to see us assume we'll hit plan. And I actually think you should still there are always companies that do well even in certain economic environments. If you have determined that you are one of those companies, I think you should always do a scenario that actually where you're hitting above plan as well. But that, I think just requires a little bit of just looking at yourself and saying, are you one of those companies that can actually sort of benefit from this? So you might actually even have the third scenario actually might be where you're actually doing better and from there looking essentially at your cost base and having a target and like, where you need to be, what's the target?

Alka Tandan
Well, it will often be the current plan that you have, but depending upon where you are, what I mean by that is particularly your cash needs and your fundraising needs. So you may all of a sudden be in a situation where you're expecting to raise next year, and now you want to wait for a variety of reasons. Valuation might be one, tough funding a remote requirement. So now you may need to actually have more runway and so then you'll have to burn less this year. If you decide that you're actually one of those companies that are going to benefit, then maybe that's not the case. So it's interesting because first of all, I think you just have to sort of know yourself and get really honest about what bucket you're in as a company and then from there you can kind of go into which scenario sort of makes sense from you and then have those honest conversations first with sales and then sort of the expenses followed after that.

Sidharth Kakkar
That makes so much sense. How often are you like revisiting these? Is it monthly or quarterly or some.

Alka Tandan
Other things are moving so fast as I think you're aware, as well as your audience is aware, that in a normal year we do a very extensive budgeting process. It's very extensive and it takes months. And then I would say we'll probably review it mid year and that usually works. And now to be clear, we're doing a forecast every single year. But what I'm saying is the entire management team getting together and really reviewing strategy as well as the numbers that thorough review probably is the plan and then probably a good reforcast. Things are changing really fast. So we're doing it right now. We're doing scenario planning as we speak and I would anticipate that we're going to look at it again in a quarter so we'll have it ready by the beginning of 23 and then I think we're going to look at it again in another quarter and see sort of like where we are.

Sidharth Kakkar
It's so true. Trying to imagine what the world would look like in a quarter just feels like we just don't know right now.

Sidharth Kakkar
Yeah, very high uncertainty.

Alka Tandan
Yeah. And it depends upon capital structure and all these things. For example, there are some public companies that have a lot of debt right now, so every time interest rates rise for them, they're probably doing scenario planning every time interest rates rise because it means that they might have to shell out millions of dollars more interest rate. So it depends. But for a company like ours, and probably for many of the other viewers, it's probably a little bit different.

Sidharth Kakkar
Totally. In 2020, Gainsight was acquired by Vista Equity. And one thing I'm really curious about is what changed before and after, especially when it comes to finance.

Alka Tandan
Yeah, well, I can talk a little bit about the decision. We had some options. We could have stayed and we could have just raised.

Alka Tandan
We could have of course gone public and so we had lots of options. But first of all, we're in a sort of for the long haul, our focus has always been to just build a durable, strong company. One of the reasons we decided to go with Vista as well. First of all, for your audience, they're 80 billion plus in management for dollars and they have, I think, about 80 companies under management. So if you put them all together, I think that the fourth largest software firm. But they're also very well known in the industry, really well known for being ones that can really get a lot of efficiency out of like a business. And so that's why we decided to sort of partner with them in this sort of phase. Even before this economic environment, we already started talking about efficiency. So in a lot of ways our charter hasn't really changed and we thought they would be a great partner in sort of helping us sort of get there. So that's kind of like how we kind of came to that decision. And I'll tell you, like, right now we're actually very happy with that.

Alka Tandan
We're happy. We're so thrilled to have them as partners. They continue to sort of believe in us and believe in our charter. And especially in an economic environment like this, it's really helpful to have investors that are just true partners for the business and really helping you think through a lot of these decisions. So it's another pair of executives that are constantly thinking about it. So in terms of what changed before and after, literally operationally, I think definitely we have another group of people to actually look at the numbers and really think through it. So I would say it's really helpful to have that. But really in terms of the actual business, honestly, we're just kind of like business as usual. They're really focused on us growing, they're really focused on us getting becoming really durable and efficient growth company. And except for having a lot of more people in the business, I would say that the average employee at Gainsight doesn't really even see much of a difference. It's probably like leadership team is meeting with Vista on a fairly regular basis to talk through different things. But it's also really great, by the way, as we go through some of these decisions to bounce things off of them.

Alka Tandan
They of course have 80 companies that are also thinking about these things at the same time. And so there's a great network as well. So I think just having that network and just be able to ping actually another CFO and talk through things has been also sort of helpful. So if anything, I think it's just like more help and more support.

Sidharth Kakkar
Yeah, I was actually going to ask more about that, which is that one of the benefits of joining a best in class portfolio, like the best equity portfolio, must be sort of the cross pollination of all the ideas of all the stuff they've done before, all the stuff that they've seen, and then also reacting in real time to things like insane market condition. So I'm curious what that has been like for you.

Alka Tandan
Yeah, they have their own capital markets group and they're really talking to the street on a regular basis. And so we're able to sort of get downloads. And if certain things come up with our companies, there's just always resources there. The way Vista is structured is we've got the deal team and the finance team, and then they've got Visa Consulting Group where there are experts in each of the operational disciplines. And so I work with both of them very closely. But to just have people who have not only been through it before actually in their professional lives and then have come over and are working with Vista, but I've seen it across the portfolio and can tell you the pitfalls before you actually go into them and help you just really think about things like in a different way, it's just really helpful, especially like at this stage. So, yeah, it's great.

Sidharth Kakkar
That's very cool. Last question I have for you is since you're such a data focused and metrics focused executive team, I'm genuinely curious, like, how do you think about what are ways that you wish finance or executive teams could go deeper or should go deeper into their metrics on a regular basis?

Alka Tandan
Yeah, so I think definitely looking at metrics in terms of product line, there's business line and then within the business line actually could be product. So I think you actually look at it both ways, really looking at for example, things like product functionality and usage and where exactly where people are actually within your product. We have a great product called PX as well that can also help you sort of do that. But I think really getting deep in that way is really helpful and particularly like the margin analysis, because that's another thing that now investors are really looking at. Like, what are your margins on each of these products? I think segmentation is also super important. So you might be looking at customers, certain number of employees and above and categorizing them, but really figuring out what's the right segmentation for your customer base and looking at metrics in that way is also something that we do on a regular basis. Cohort analysis for sure. That's how we actually calculate our NRR as well. So following cohorts and then I think the last thing is just thinking through leading versus lagging metrics because of course the ones that are lagging, there's not much you can do about it, but you still want to know.

Alka Tandan
But we all kind of want to get in front of our business. So thinking through those as well.

Sidharth Kakkar
Yeah, like customer health, I imagine, right?

Alka Tandan
Yeah, that's right.

Sidharth Kakkar
Sorry, one last wonky question. When it comes to margin analysis, either on a product line level or a business line level or a segment level, something that we see a lot of companies try to figure out or struggle with a little bit is actually getting the granularity in the cost data, what goes with what. And I don't know if you have any advice for CFOs who are thinking about trying to do that level of analysis.

Alka Tandan
Yeah, I think as always, as finance people want to be 100% with everything, but sometimes you have to kind of find the middle ground. So what I mean by that is for a lot of our products, for example, we can pretty much identify the R&D people. We can pretty much identify the sales and marketing people. But for other items, we often have to come up with an allocation methodology. So in those instances, we will actually come up with an allocation methodology and we will actually bring it through the to the executive team and actually talk through it, make sure everybody's aligned, especially when you're doing something like a margin analysis and then sort of roll it out. I think it's better to have data that is maybe 70%, even 80% there versus not looking at it at all. And I think it's a great way to just sort of like align the business in looking at this data. So that would be my advice there.

Sidharth Kakkar
I really like that. How often would you adjust these allocations?

Alka Tandan
Probably max once a year. It's something I think that you're looking at kind of like during planning for the most part. Again, unless there's something like in the business that sort of like rapidly changing. But I wouldn't say in terms of allocation methodology. You have to really look at it, like more than that.

Sidharth Kakkar
Yeah, I can definitely imagine that a lot of our finance audience will relate to the idea of, like, perfection is what you want, but you have to be okay with getting the insights even if you're not getting the perfection in the data.

Alka Tandan
I think so. I think it's the type of thing where even if it's not perfect, you have to just kind of keep moving and still take a look at it. Because even when I knew it wasn't perfect, I always usually get some insights. And sometimes you will look at it and say, okay, well, this doesn't quite make sense. And then you go back and you kind of adjust the allocation methodology and then it just makes more sense. But I think just starting is sometimes half the battle.

Sidharth Kakkar
Yeah, totally. Thanks so much for recording this with us, and I think people are going to learn quite a lot from you. So really appreciate it.