In an effort to promote my upcoming presentation at SaaStr 2018, which is currently on the agenda for Wednesday, February 7th at 9:00 AM in Studio C, I thought I’d do a quick post sharing what I’ll be covering in the presentation, officially titled, “The Best of Kellblog: 10 Non-Obvious Things About Scaling SaaS.”
Before jumping in, let me say that I had a wonderful time at SaaStr 2017, including participating on a great panel with Greg Schott of MuleSoft and Kathryn Minshew of The Muse hosted by Stacey Epstein of Zinc that discussed the CEO’s role in marketing. There is a video and transcript of that great panel here.
For SaaStr 2018, I’m getting my own session and I love the title that the folks at SaaStr came up with because I love the non-obvious. So here they are …
The 10 Non-Obvious Things About Scaling a SaaS Business
1. You must run your company around ARR. Which this may sound obvious, you’d be surprised by how many people either still don’t or, worse yet, think they do and don’t. Learn my one-question test to tell the difference.
2. SaaS metrics are way more subtle than meets the eye. Too many people sling around words without knowing what they mean or thinking about the underlying definitions. I’ll provide a few examples of how fast things can unravel when you do this and how to approach SaaS metrics in general.
3. Former public company SaaS CFOs may not get private company SaaS metrics. One day I met with the CFO of a public company whose firm had just been taken private and he had dozens of questions about SaaS metrics. It had never occurred to me before, but when your job is to talk with public investors who only see a limited set of outside-in metrics, you may not develop fluency in the internal SaaS metrics that so obsess VC and PE investors.
4. Multi-year deals make sense in certain situations. While many purists would fight me to the death on this, there are pros and cons to multi-year deals and circumstances where they make good sense. I’ll explain how I think about this and the one equation I use to make the call.
5. Bookings is not a four-letter word. While you need to be careful where and when you use the B-word in polite SaaS company, there is a time and place to measure and discuss bookings. I’ll explain when that is and how to define bookings the right way.
6. Renewals and satisfaction are more loosely correlated than you might think. If you think your customers are all delighted because they’re renewing, then think again. Unhappy customer sometimes renew and happy ones don’t. We’ll discuss why that happens and while renewal rates are often a reasonable proxy for customer satisfaction, why you should also measure customer satisfaction using NPS, and present a smart way to do so.
7. You can’t analyze churn by analyzing churn. To understand why customers churn, too many companies grab a list of all the folks who churned in the past year and start doing research and interviews. There’s a big fallacy in this approach. We’ll discuss the right way to think about and analyze this problem.
8. Finding your own hunter/farmer metaphor is hard. Boards hate double compensation and love splitting renewals from new business. But what about upsell? Which model is right for you? Should you have hunters and farmers? Hunters in a zoo? Farmers with shotguns? An autonomous collective? We’ll discuss which models and metaphors work, when.
9. You don’t have to lose money on services. Subsidizing ARR via free or low-cost services seems a good idea and many SaaS companies do it. But it’s hell on blended gross margins, burns cash, and can destroy your budding partner ecosystem. We’ll discuss where and when it makes sense to lose money on services — and when it doesn’t.
10. No matter what your board says, you don’t have to sacrifice early team members on the altar of experienced talent. While rapidly growing a business will push people out of their comfort zones and require you to build a team that’s a mix of veterans and up-and-comers, with a bit creativity and caring you don’t have to lose the latter to gain the former.
I hope this provides you with a nice and enticing sample of what we’ll be covering — and I look forward to seeing you there.
Dave, great feedback as always. Regarding #6, I’d throw in customer usage which might take some creativity on tracking and/or monitor. This will not be true for all SaaS-based offerings, but in some cases, the correlation between usage and renewal will probably be high.
Thanks Mark and I agree. BTW, I’d argue that usage and renewal are not hard-linked either. Certainly if someone isn’t using, then renewal is going to be hard, but if they are using it’s not a given that they will renew. They may be bringing up their new system in parallel and go from 100% to 0% usage overnight.
On Churn can you say Survivorship Bias ! … or more precisely !(Survivorship) bias …
I can indeed. Many folks do survivor-biased retention rates.
This is a cruel post, Dave. Hope to see follow on posts, or links to blog posts covering these 10 ideas in the future.
Hey, it’s a teaser for a presentation!
Unhappy customers often renew because the cost of change far outweighs the cost of staying with what you know. There comes a point when the cost benefit see-saw falls in favour of change but ensuring that you have a good R in your PADRE will hopefully mean you can stay ahead of the game.
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I enjoyed the presentation at SaaStr but am not able to find the deck online, and was not able to take notes fast enough. Can you share the slides you showed? :-)
Never mind. I found it.
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