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Axonify Budgeting For Rapid Growth Case Solution

Solution Id Length Case Author Case Publisher
2241 2038 Words (11 Pages) Howard Armitage, Dave Pooley, Alan Webb Ivey Publishing : W18181
This solution includes: A Word File A Word File and An Excel File An Excel File

Axonify is involved in providing online employee learning platform and intends to change the corporate learning environment. The company has seen remarkable growth since its formation in 2011 and expanded its portfolio from one to many fortune 1000 companies. Under the leadership of Carol Leaman, the company received its first seed money of $1.5M from California based venture capital and started to revamp the existing software and to expand their operations. In 2013, the company onboarded Wall Mart as a Marquee client allowing the company to access capital from other investors. For instance, the company received $3.5M from a New York based venture capital followed by $27M in 2016 from JMI Equity and BDC Capital. 

Following questions are answered in this case study solution

  1. Current Situation Analysis

  2. Why are budgets important in growing companies like Axonify

  3. Calculate the total budgeted cost for 2017 of generating the marketing qualified leads (MQL) necessary for Axonify’s revenue growth goal.

  4. Estimate Axonify’s average total customer acquisition cost (CAC) for 2017

  5. How can Axonify improve the sales generation and reduce the CAC?

  6. Evaluate axionym’s budgeting approach and recommend any changes needed for growth.

  7. Show your analyses in graphical format, as well as in Excel spreadsheets. You can use data visualization software or Excel graphics

  8. Recommendation


Case Analysis for Axonify Budgeting For Rapid Growth

Company has shown healthy growth in annual recurring revenues in 2016 and reported $11.7M in 2016 as compared to $8M in 2015. Currently, Dave Pooley (CFO) is concerned about the budget estimates for total incremental cost to be incurred in 2017 for increasing the customer base and the average cost of acquiring new customer. The senior management and the board has decided a target of $10M from new customers while cost to acquire new customer not to exceed $150,000 per customer. The cost of acquiring new customers include cost of marketing qualified lead (MQLs), marketing salaries, sales salaries and other sales operating salaries. The company does not use a typical top-down approach to come up with the budgeted numbers and division heads possess autonomy to forward their respective budgets. A quarterly review was conducted to evaluate performance and only significant deviation from target was followed up. CFO is concerned whether any changes in the current approach would help to achieve the target growth. 

2. Why are budgets important in growing companies like Axonify

Careful planning and execution is extremely important in any stage of business growth, for all ages of business and sizes. A sound business plan with clear short and long term objective could not only help to create a road map for financial success but also provides an opportunity to expand. For a growing company like Axonify, a critical aspect of planning is the budget which derives success by allocating funds, planning operations, and achieving target annual recurring revenues (ARR). Since Axonify is in the early stage of development therefore budgets have significant importance to achieve goals and objectives. Since the revenue (ARR) targets are set with nod of senior management and the board which provides proactive planning and a road map to the entire firm to work closely to attain the company’s profitability objectives. At the same time, the management of the company would have access to a better picture of the financial status for the upcoming period. This will help Pooley and Leaman in determining the requirement of capital for each division. In this regard, budgets would allow Axonify to be more efficient by categorizing the essential and non-essential costs or expenses. Moreover, the management can also use the budgets as an evaluation or appraisal tool to check the performance of the departments by comparing the actual and budgeted targets whereby strategy and future planning can be improved.  

3. Calculate the total budgeted cost for 2017 of generating the marketing qualified leads (MQL) necessary for Axonify’s revenue growth goal.

The total budgeted cost for 2017 of MQL is calculated to be $2,267,514. The total ARR to be generated by ODRs is $5,250,000 after adjusting for upselling activities, referred clients, and ARR generated from Leaman’s leads. Since historical passed leads conversion rate is 10% meaning only 10% of passed leads would be converted to an actual customer. Therefore, 350 passed leads would be required to generate ARR of $5,250,000 assuming ARR generated by one customer to be $150,000 as historical. From the 2016 analysis, conversion rates of discovery calls, introduction calls, and MQL can be determined. From backward calculation, the total number of MQL calculated to be 15,117. Since cost of one generating one MQL is $150 which gives total budgeted cost of $2,267,524 for 2017 of generating MQLs. 

Budgeted cost for 2017 of generating Marketing Qualified Leads (MQLs)



ARR Target


Upselling Activities


ARR from new customers


ODR's & Sales Rep share


Passed Leads / ODR / Month


Passed Leads / ODR / Annum


Passed Leads conversion rate


Historical ARR Generated by one customer


Pass Leads required for ARR


Discovery Calls Required


Introduction Calls Required


MQLs required


Cost / MQL


Total Budgeted cost of MQLs



2016  Analysis



Total incremental ARR


Upselling Activities


ARR from new customers


 New Customers




 Introduction calls


 Discovery Calls


 Passed Leads


 Historical Conversion rates



 Introduction / Discovery


 MQL / Introduction


4. Estimate Axonify’s average total customer acquisition cost (CAC) for 2017

Total marketing, sales rep, MQL, and other operating costs are required for estimation of Axonify’s total customer acquisition cost. Total number of new customers required to generate $10M of ARR is 67. As given in previous question, 350 passed leads are needed which can be generated by 6 ODRs. Based on 2:1 ratio, 12 sales reps would be needed. From 2016 analysis, salaries of one ODR and sales rep can be estimated. In this regard, the total salaries of ODR’s and sales rep to be calculated as $4.046M each. Other sales operating cost of $1M is assumed to be the same as last year. The budgeted MQL cost (calculated in previous question) is $2.267M. Thus, total customer acquisition cost (CAC) comes out to be $11.360M while average total CAC is $170,400. 

Average Total Customer Acquisition cost

From 2016 analysis




 Sales Rep


 Marketing Salaries


 Sales Salaries


 Salary per ODR


 Salary per sales rep


 For 2017 budget

Total Required customers


Total ODRs needed


Total Sales Rep needed


Total Marketing / ODRs Salaries


Total sales rep salaries


Other sales operating cost


 Total Budgeted cost of MQLs


Total customer acquisition cost


Average customer acquisition cost


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