I joined Dan to discuss my work-in-process 2023 predictions post (which I really need to get finished in the next week). We start out by reviewing a few of my 2022 predictions, where Dan takes a somewhat European angle in his questioning given my work with Balderton Capital. After that, based on the sneak preview of my 2023 predictions that I gave to Dan, he asks some questions about what I see coming in 2023.
It’s a long episode. Dan asks some great questions, and I give some rambling answers, so if you’re listening on the treadmill make sure you pace yourself. You’ll be burning a few more calories than usual.
You can find the episode on Spotify and Apple podcasts. Thanks again to Dan for having me and I hope you enjoy the episode.
Here are the slides from the Balderton Capital webinar I did today with Michael Lavner, entitled How to Emerge Stronger from the Downturn than You Went In. For people who can’t use Slideshare, they are also available here.
Balderton has posted a video of the Zoom recording of the event, available here.
We discuss:
The importance of how founders/CEOs frame challenges to the organization.
What we mean by “stronger.”
Focus, how to do fewer things, better — including reading The Crux by Richard Rumelt.
M&A, from either the buy or sell side.
Reorientation of use-cases and messaging, how to adapt your point of sail to the changing winds.
Playing into SaaS rationalization, how to try and take an ostensibly negative trend and turn it to your advantage.
Upgrading your talent.
Thanks to everyone who attended. See you next month (Feb 9th) for a same-time, same-place, same-format webinar on the Balderton Founder’s Guide to B2B Sales. I’ll drop a link to the event in here, once available.
I’m writing this post to promote an upcoming webinar entitled How To Emerge From The Downturn Stronger Than You Went In. The webinar will be held on Tuesday, January 24th and is hosted by Balderton Capital, where I work as an EIR. The webinar will start at 3:00 pm UK time, 10:00 am Eastern, and 7:00 am Pacific (lucky me), and will last one hour.
While Balderton invests in European (broadly defined) companies, the webinar is nevertheless open to all. Some Balderton content necessarily takes the European angle on issues (e.g., my USA expansion mistakes series), but for this webinar the material should be 95%+ equally applicable worldwide. So please join us if you’re interested, regardless of where you work or your fundraising plans.
Michael will run a 30-minute Q&A session that pulls from questions submitted by the audience (and/or that pop into his head).
I love live Q&A so there should be a lot of interaction and it should be a lot of fun.
Here’s a preview of the five ways to Emerge Stronger that we’ll be discussing at the event.
Sharpen focus. As they saying goes, “never waste a good crisis.” Use the downturn to force yourself to answer some hard questions about your strategy. Are we focused enough? Do we remember our Latin teacher who taught us that focus was singular? Are we putting all our executive energy into The Crux of our strategic challenge? Are we “throwing bones” to board or team members? Can we afford to?
M&A. Depending on your situation, you’re either a buyer or seller — but, either way, companies will be trying to broaden their product lines to get more leverage from their clostly go-to-market machines. (Think: “we need put more things in sales’ bag.”) Multiples are down, so it’s a good time to buy. And if you lack the cash or strategic position to ride out the storm, it’s not necessarily a bad time to sell — especially when you compare the expected value of your equity between a potentially dirty term sheet and a solid, clean M&A offer.
Play into SaaS rationalization. To quote Jim Lovell, “there are people who make things happen, there are people who watch things happen, and there are people who wonder what happened.” Be the the first type. SaaS spend rationalization is going to happen, whether we like it or not. How can you position your company to be on the right side of that trend? How can we turn this threat into an opportunity?
Re-orient your use-cases and messaging. Can you grow faster than the competiton by tapping into the new concerns of your buyers? How have their priorities changed? How does that map to the various use-cases of your product? If you’re selling conversation intelligence, should you switch campaigns from “onboard faster” to “drive increased productivity?”
Upgrade talent. The labor market was pretty brutal during the past 5 years. How can you exploit the easier labor market to upgrade key members of your team? How do you balance this upgrade opportunity with a dance with who brung ya ethos of employee loyalty? How can you build a culture that lets you do both?
It should be a great event and both Michael and I look forward to seeing you there. You can register here.
If you live in the country and see someone out walking a smaller dog, once in a while it will be dressed like this:
Does your startup need a coyote vest?
That’s called a coyote vest and it’s pet body armor designed to prevent Bruiser from being taken by a coyote and/or hawk. I think about coyote vests whenever I think about larger vendors running envelopment strategies against smaller vendors.
A Review of Envelopment Strategies
Envelopment strategies are common, and often winning, strategies in enterprise software. Two classic examples from the days of yore:
Microsoft wiping out Wordperfect and Lotus by suite-izing word processing and spreadsheets, along with presentations, into a single office suite category with Microsoft Office.
Siebel transforming sales force automation (SFA), the category it originally created, into customer relationship management (CRM) by building its own marketing automation and acquiring customer service via Scopus [1] [2].
I’ve written before about envelopment strategies, then using SuccessFactors and Marketo as examples. I’ve executed envelopment strategies, too. At BusinessObjects, we pioneered the category for query & reporting (Q&R) tools, and then ran an envelopment strategy that broadened and transformed our category into business intelligence suites. We did that by building OLAP into our Q&R tool, and then spending $1B to acquire Crystal Decisions in enterprise reporting.
More recent examples include:
Qualtrics, who evolved from a product-centric survey software positioning to a solutions-centric experience management (XM) positioning, and defined a new category the Play Bigger way in the process [3].
Alation, who pioneered the data catalog as an application for data search & discovery and then transformed it into an overall data intelligence platform for data search & discovery, data governance, cloud data migration, and data privacy.
Alation transformed the data catalog from its original search & discovery use-case to a broader, data intelligence platform.
In short, envelopment strategies work — to the point where they’re basically the standard play in enterprise software: pioneer a category, win it [4], up-level it by defining a broader problem, define what’s in and what’s out when it comes to solving that broader problem [5], and then deliver against that definition.
“You either die a point solution, or you live long enough to become a platform.”
But that’s just our warm-up for today, where our question is not whether envelopment strategies are effective (answer, yes) but instead: what should I do when a competitor is trying to envelop me?
Combatting Envelopment Strategies
Deciding your response to an envelopment strategy requires you to determine where your category fits into the larger vendor’s broader vision.
The key question: is your space one of the top three (or so) strategic components in the larger vendor’s broader vision? If it is, you face a very different situation from when it is not.
For example, back in the early days of CRM, sales, marketing, and customer service were all defined as in the space. But professional services was out.
The original definition of CRM left room beyond sales, marketing, and service (as well as plenty of room within each)
When your company is not within one of those strategic components, life is fairly easy. You will likely be able to partner with the larger vendor because while vision overlap may exist, reality overlap does not — and the sales force knows that. For example, early CRM vendors did not offer a professional services automation (PSA) tool and their sellers were typically happy to connect customers to a good PSA offered by a friendly partner.
While such partnerships sow the seeds of downstream conflict because the larger vendor usually expands its scope over time, that is a high-class problem. You can build a substantial company in the period between the larger vendor’s first entry and when they eventually get their act together. That often takes multiple, failed, organic attempts — executed across years — followed by a change in course and a major acquistion. Oracle failed repeatedly at in-house-developed applications for about 15 years before eventually changing course to acquire PeopleSoft, Siebel, and others. Salesforce eyed Yammer around 2010, then built Chatter to an only modest reception, and about 10 years later acquired Slack to provide best-of-breed collaboration.
But it’s not usually as simple as in or out. Because these boxes tend to be quite broad, there is usually room for specialization. For example, for many years customer service largely meant case management to Salesforce — omitting B2C customer service (e.g., high-volume case deflection portals) or field service (e.g., rolling trucks). ServiceMax, RightNow, and Click all partnered succesfully with Salesforce in these areas before Oracle acquired RightNow (early in the game) and Salesforce later acquired Click after nearly a decade of partnership.
Sometimes, the situation is more subtle, where the issue is not room due to specialization, but room due to lack of commitment. In these cases, the larger vendor “cares, but not that much” about a box. The vendor may want to cover a large number of boxes, each with a different commitment level that is usually known with the organization [7], but never expressly communicated:
High. We must succeed in this space.
Medium. We care, but not that much.
Low. We really don’t care and just want to “check the box.”
If you skim the larger vendor’s marketing, it will be difficult to discern the level of commitment associated with any given space. But, if you spend more time, looking for rich content, deep white papers, and numerous customer reference stories, you will likely develop a sense for whether the marketing is simply veneer covering a low-commitment box as opposed to the hardwood of a core one. Either way, the sales force will know. Partners will know. Most employees will know [7].
For example, Oracle had its own BI tool, Discoverer, the entire time BusinessObjects grew from zero to IPO, serving largely Oracle customers, in many cases partnering with the Oracle field [8]. In strategy circles, Oracle was executing a “weak substitutes” strategy, treating the space opportunistically, hoping to get extra revenues from indifferent customers, but understanding their offering was not fit to win in a best-of-breed evaluation.
Summary of Strategic Responses to Envelopment Strategies
With that backdrop, let’s summarize the options for how you can respond when someone tries to envelop you.
Sell. The key here is timing. If a bigger vendor approaches you early in your lifetime, you might think “too early for me.” But, for them, it’s a clear sign that they are tracking the space and doing a make / buy / partner assessment. If you rebuff the offer, you might get a second chance, but it will likely be years later, after they try building it themselves or acquiring another company and failing. Remember, when selling to a strategic, it’s about them, not you [9]. Examples: Aptrinsic selling to Gainsight, Chorus selling to Zoominfo, though later in its lifecycle.
Specialize. Get so strong in your space that buying another vendor wouldn’t really solve the larger vendor’s problem, thus they decide to build or partner in the space. If you execute well and you’re really focused, you can beat their in-house development efforts and stay a leader despite the larger vendor’s efforts. If you also have great access to capital so you can grow fast, you can also build a substantial company while the larger vendor fumbles around. Your strength and anticipated response can shape their “in/out” definition of the category. Examples: Gong, Clari, Amplitude [10].
Segment. Pick a size-based, functional, or vertical segment of the market and go deep. Think: we’re the best CRM vendor for SMB/MM (Hubspot), we’re the best application for the customer service function (Zendesk), or we’re the best marketing personalization vendor for retailers (Bluecore). This strategy can work very well to provide differentiation from the would-be enveloper and build a moat to protect your from their attack. Think: “the megavendor may be in bigger in the overall market, but nobody knows and cares about you like we do.” [10]
Counter. Envelop back. If someone tries to envelop you, well, two can play that game — and you can envelop right back. This works best when you’re similar in size to the would-be enveloper. Examples: Back in the day, BusinessObjects and Cognos each tried to envelop each other. After BusinessObjects bested Cognos in the BI suites evolution, Cognos countered by trying to unite BI suites with planning software to create enterprise performance management [11]. Today, in a similar clash, Alation and Collibra are trying to envelop each other in data intelligence platforms, the former starting from its leadership position in data catalogs and latter from its strong position in data governance. I believe Alation has the better strategic position in that battle and that seems to be proving out in the market [12] — though I am by no means a disinterested observer [13].
Suffer. Finally, you can pretend that envelopment isn’t happening around you — an all too popular strategy, that rarely results in a good outcome. As Mark Twain said, “denial ain’t just a river in Egypt.” Ignoring category envelopment is a fast path to becoming a question in Trivial Pursuit Enterprise Software Edition. Example: name the enterprise reporting vendor who, in the early 2000s, had a superior product, but nevetheless lost to Crystal? Answer: Actuate. While it’s fashionable to say, perhaps over a nice glass of Michter’s 20 year in Davos, that building a company is about ignoring the competition and following your true North Star, that has nothing to do with the real world of strategy which is all about rising to strategic challenges, which often arise from competition.
A good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them. — Richard Rummelt
# # #
Notes
[1] Hence the original, and fairly long-lasting, definition of CRM as sales, marketing, and service.
[2] That Siebel would shortly thereafter miss the cloud transformation and be displaced by Salesforce is a story for another day. Per an old friend who used to work there: “I decided to leave Siebel the day I heard the quite powerful VP of Product say we were going to beat Salesforce by being more Siebel than we’ve ever been.”
[3] Effectively doing two transformations: (a) from survey software to customer experiencement management, (b) from customer experience management (application) to overall experience management platform — for customer, employee, product, and brand experience management.
[4] Don’t forget this important step! You can be too busy thinking about the next thing to remember to win the category you pioneered.
[5] The hardest part of the exercise in my opinion. Where do you need to make, buy, or partner? What really needs to be integrated in versus what should be connected externally and/or built upon. This is an exercise that intersects customer centricity with core competencies.
[6] I’m happy to say I joined the board of Jiminny in 2022.
[7] Sadly, know usually means tacit knowledge within the company and its close ecosystem. Companies seem to feel a need to communicate as if they are all-in in every space in which they play. This damages corporate credibility, but there is no obvious alternative. Think: “we sell a great thing 1, 2, and 3 and a just-OK thing 4 and 5. People figure it out anyway, but it’s hard to say in a marketing collateral or sales training. Plus, sometimes, senior management think it’s also a great thing 4 and 5, and few are willing to tell the Emperor that they’re wearing no clothes.
[8] Knowing that a $3M data warehouse Oracle database deal might ride on the success of a demo built in a $50K BI tool, and knowing that Oracle had only a weak commitment and a meh BI product, a seller might willingly trade away the $50K of BI tool revenue to increase the odds of winning the $3M database deal.
[9] Making a product acquisition, especially a strategic one, at a larger vendor requires much more than it being a good idea. It’s more like stars aligning. Larger vendors often track spaces and key vendors within them for years before making an acquisition. Triggers for actually making an acquisition could be a competitor acquisition (e.g., Oracle buying Endeca in response to HP acquiring Autonomy), the loss of a major customer, acknowledgement of failure in a new product initiative, a change in board sentiment, or a drop in a company’s stock price such that it become acquireable. Example: we had discussions with Acta several times, over a period of years, before eventually acquiring them at BusinessObjects.
[10] Specialize and segment are both the coyote vest strategy — get so strong in a space that it’s unenvelope-able (or at least, not worth enveloping) from the larger vendor’s POV.
[11] Via the acquistion of Adaytum. And yes, the original definition of EPM was the unification of BI and planning. This was an analyst-led shotgun wedding that Cognos embraced and one that never really made sense to customers. While BusinessObjects later countered by acquiring SRC, BI and planning never really came together. You could put them under one proverbial roof, but they never became one category. The two categories later diverged and EPM was redefined as the unification of financial planning and consolidation software (another analyst-led shotgun wedding that also later largely fell apart).
[12] If you want to provide a general-purpose data access platform designed to help a wide range of users find, understand, and trust data, are you better off starting from a data access point of view (POV) or a data governance one? Methinks access, as it’s fundamentally a “play offense with data” POV whereas data governance is fundamentally a “play defense with data” POV. I think customers want to buy the former (offense, subject to proper defense as a constraint) and it’s easier to adapt an access POV to governance than the converse. Growing up around dusty glossaries and policies isn’t a great way to get spiritually in tune with end-user needs, collaboration, access, and a data democratization POV. IMHO.
[13] I have a long history with Alation as an angel investor, advisor, former board member, interim gig employee, and consultant.
I’ve been CEO of two startups and on the board of about ten. That means I’ve presented a lot of operating plans to boards. It also means I’ve had a lot of operating plans presented to me. Frankly, most of the time, I don’t love how they’re presented. Common problems include:
Lack of strategic context: management shows up with a budget more than a plan, and without explaining the strategic thinking (one wonders, if any) behind it. For a primer, see here.
Lack of organizational design: management fails to show the proposed high-level organizational structure and how it supports the strategy. They fail to show the alternative designs considered and why they settled on the one they’re proposing.
A laundry list of goals. OKRs are great. But you should have a fairly small set – no more than 5 to 7 – and, again, management needs to show how they’re linked to the strategy.
Finance types on the board might view these as simple canapes served before the meal. I view them as critical strategic context. But, either way, the one thing on which everyone can agree is that the numbers are always the main course. Thus, in this post, I’m going to focus on how to best present the numbers in an annual operating plan.
Context is King
Strategic context isn’t the only context that’s typically missing. A good operating plan should present financial context as well. Your typical VC board member might sit on 8-10 boards, a typical independent on 2 (if they’re still in an operating role), and a professional independent might sit on 3-5. While these people are generally pretty quantitative, that’s nevertheless a lot of numbers to memorize. So, present context. Specifically:
One year of history. This year that’s 2021.
One year of forecast. This year that’s your 2022 forecast, which is your first through third quarter actuals combined with your fourth-quarter forecast.
The proposed operating plan (2023).
The trajectory on which the proposed operating plan puts you for the next two years after that (i.e., 2024 and 2025).
The last point is critical for several reasons:
The oldest trick in the book is to hit 2023 financial goals (e.g., burn) by failing to invest in the second half of 2023 for growth in 2024.
The best way to prevent that is to show the 2024 model teed up by the proposed 2023 plan. That model doesn’t need to be made at the same granularity (e.g., months vs. quarters) or detail (e.g., mapping to GL accounts) as the proposed plan – but it can’t be pure fiction either. Building this basically requires dovetailing a driver-based model to your proposed operating plan.
Showing the model for the out years helps generate board consensus on trajectory. While technically the board is only approving the proposed 2023 operating plan, that plan has a 2024 and 2025 model attached to it. Thus, it’s pretty hard for the board to say they’re shocked when you begin the 2024 planning discussion using the 2024 model (that’s been shown for two years) as the starting point.
Presenting the Plan in Two Slides
To steal a line from Name That Tune, I think I can present an operating plan in two slides. Well, as they say on the show: “Dave, then present that plan!”
The first slide is focused on the ARR leaky bucket, metrics derived from ARR, and ARR-related productivity measures
The second slide is focused on the P&L and related measures.
There are subjective distinctions in play here. For example, CAC ratio (the S&M cost of a dollar of new ARR) is certainly ARR-related, but it’s also P&L-driven because the S&M cost comes from the P&L. I did my best to split things in a way that I think is logical and, more importantly, between the two slides I include all of the major things I want to see in an operating plan presentation and, even more importantly, none of the things that I don’t.
Slide 1: The Leaky Bucket of ARR and Related Metrics
Let’s review the lines, starting with the first block, the leaky bucket itself:
Starting ARR is the ARR level at the start of a period. The starting water level of the bucket.
New ARR is the sum of new logo (aka, new customer) ARR and expansion ARR (i.e., new ARR from existing customers). That amount of “water” the company poured into the bucket.
Churn ARR is the sum of ARR lost due to shrinking customers (aka, downsell) and lost customers. The amount of water that leaked out of the bucket.
Ending ARR is starting ARR + new ARR – churn ARR. (It’s + churn ARR if you assign a negative sign to churn, which I usually do.) The ending water level of the bucket.
YoY growth % is the year-over-year growth of ending ARR. How fast the water level is changing in the bucket. If I had to value a SaaS company with only two numbers, they would be ARR and YoY ARR growth rate. Monthly SaaS companies often have a strong focus on sequential (QoQ) growth, so you can add a row for that too, if desired.
The next block has two rows focused on change in the ARR bucket:
Net new ARR = new ARR – churn ARR. The change in water level of the bucket. Note that some people use “net new” to mean “net new customer” (i.e., new logo) which I find confusing.
Burn ratio = cashflow from operations / net new ARR. How much cash you consume to increase the water level of the bucket by $1. Not to be confused with cash conversion score which is defined as an inception-to-date metric, not a period metric. This ratio is similar to the CAC ratio, but done on a net-new ARR basis and for all cash consumption, not just S&M expense.
The next block looks at new vs. churn ARR growth as well as the mix within new ARR:
YoY growth in new ARR. The rate of growth in water added to the bucket.
YoY growth in churn ARR. The rate of growth in water leaking from the bucket. I like putting them next to each other to see if one is growing faster than the other.
Expansion ARR as % of new ARR. Percent of new ARR that comes from existing customers. The simplest metric to determine if you’re putting correct focus on the existing customer base. Too low (e.g., 10%) and you’re likely ignoring them. Too high (e.g., 40%) and people start to wonder why you’re not acquiring more new customers. (In a small-initial-land and big-expand model, this may run much higher than 30-40%, but that also depends on the definition of land – i.e., is the “land” just the first order or the total value of subscriptions acquired in the first 6 or 12 months.)
The next block focuses on retention rates:
Net dollar retention = current ARR from year-ago cohort / year-ago ARR from year-ago cohort. As I predicted a few years back, NRR has largely replaced LTV/CAC, because of the flaws with lifetime value (LTV) discussed in my SaaStr 2020 talk, Churn is Dead, Long Live Net Dollar Retention.
Gross dollar retention = current ARR from year-ago cohort excluding expansion / year-ago ARR from year-ago cohort. Excluding the offsetting effects of expansion, how much do customer cohorts shrink over a year?
Churn rate (ATR-based) = churn ARR/available-to-renew ARR. Percent of ARR that churns measured against only that eligible for renewal and not the entire ARR base. An important metric for companies that do multi-year deals as putting effectively auto-renewing customers in the denominator damps out
The next block focuses on headcount:
Total employees, at end of period.
Quota-carrying reps (QCRs) = number of quota-carrying sellers at end of period. Includes those ramping, though I’ve argued that enterprise SaaS could also use a same-store sales metric. In deeper presentations, you should also look at QCR density.
Customer success managers (CSMs) = the number of account managers in customer success. These organizations can explode so I’m always watching ARR/CSM and looking out for stealth CSM-like resources (e.g., customer success architects, technical account managers) that should arguably be included here or tracked in an additional row in deeper reports.
Code-committing developers (CCDs) = the number of developers in the company who, as Elon Musk might say, “actually write software.” Like sales, you should watch developer density to ensure organizations don’t get an imbalanced helper/doer ratio.
The final block looks at ARR-based productivity measures:
New ARR/ramped rep = new ARR from ramped reps / number of ramped reps. This is roughly “same-store sales [link].” Almost no one tracks this, but it is one of several sales productivity metrics that I like which circle terminal productivity. The rep ramp chart’s 4Q+ productivity is another way of getting at it.
ARR/CSM = starting ARR/number of CSMs, which measures how much ARR each CSM is managing. Potentially include stealth CSMs in the form of support roles like technical account manager (TAM) or customer success architects (CSAs).
ARR/employee = ending ARR/ending employees, a gross overall measure of employee productivity.
Slide 2: The P&L and Related Metrics
This is a pretty standard, abbreviated SaaS P&L.
The first block is revenue, optionally split by subscription vs. services.
The second block is cost of goods sold.
The third block is gross margin. It’s important to see both subscription and overall (aka, blended) gross margin for benchmarking purposes. Subscription gross is margin, by the way, is probably the most overlooked-yet-important SaaS metric. Bad subscription margins can kill an investment deal faster than a high churn rate.
The fourth block is operating expense (opex) by major category, which is useful for benchmarking. It’s also useful for what I call glideslope planning, which you can use to agree with the board on a longer-term financial model and the path to get there.
The penultimate block shows a few more SaaS metrics.
CAC ratio = S&M cost of a $1 in new ARR
CAC payback period = months of subscription gross profit to repay customer acquisition cost
The last block is just one row: ending cash. The oxygen level for any business. You should let this go negative (in your financial models only!) to indicate the need for future fundraising.
Scenario Comparisons
Finally, part of the planning process is discussing multiple options, often called scenarios.
While scenarios in the strategy sense are usually driven by strategic planning assumptions (e.g., “cheap oil”), in software they are often just different version of a plan optimized for different things:
Baseline: the default proposal that management usually thinks best meets all of the various goals and constraints.
Growth: an option that optimizes growth typically at the expense or hitting cash, CAC, or S&M expense goals.
Profit: an option that optimizes for cash runway, often at the expense of growth, innovation, or customer satisfaction.
Whatever scenarios you pick, and your reasons for picking them, are up to you. But I want to help you present them in a way that is easy to grasp and compare.
Here’s one way to do that:
I like this hybrid format because it’s pulling only a handful of the most important rows, but laying them out with some historical context and, for each of the three proposed scenarios, showing not only the proposed 2023 plan also the 2024 model associated with it. This is the kind of slide I want to look at while having a discussion about the relative merits of each scenario.
What’s Missing Here?
You can’t put everything on two slides. The most important things I’m worried about missing in this format are:
Segment analysis: sometimes your business is a blended average of multiple different businesses (e.g., self-serve motion, enterprise motion) and thus it’s less meaningful to analyze the average than to look at its underlying components. You’ll need to add probably one section per segment in order to address this.
Strategic challenges. For example, suppose that you’ve always struggled with enterprise customer CAC. You may need to add one section focused solely on that. “Yes, that’s the overall plan, but it’s contingent on getting cost/oppty to $X and the win rate to Y% and here’s the plan to do that.”
Zero-based budgeting. In tough times, this is a valuable approach to help CEOs and CFOs squeeze cost out of the business. It takes more time, but it properly puts focus on overall spend and not simply on year-over-year increments. In a perfect world, the board wouldn’t need to see any artifacts from the process, but only know that the expense models are tight because every expense was scrutinized using a zero-based budgeting process.
Conclusion
Hopefully this post has given you some ideas on how to better present your next operating plan to your board. If you have questions or feedback let me know. And I wish everyone a happy and successful completion of planning season.
You can download the spreadsheet used in this post, here.
I’m Dave Kellogg, advisor, director, consultant, angel investor, and blogger focused on enterprise software startups. I am an executive-in-residence (EIR) at Balderton Capital and principal of my own eponymous consulting business.
I bring an uncommon perspective to startup challenges having 10 years’ experience at each of the CEO, CMO, and independent director levels across 10+ companies ranging in size from zero to over $1B in revenues.
From 2012 to 2018, I was CEO of cloud EPM vendor Host Analytics, where we quintupled ARR while halving customer acquisition costs in a competitive market, ultimately selling the company in a private equity transaction.
Previously, I was SVP/GM of the $500M Service Cloud business at Salesforce; CEO of NoSQL database provider MarkLogic, which we grew from zero to $80M over 6 years; and CMO at Business Objects for nearly a decade as we grew from $30M to over $1B in revenues. I started my career in technical and product marketing positions at Ingres and Versant.
I love disruption, startups, and Silicon Valley and have had the pleasure of working in varied capacities with companies including Bluecore, FloQast, GainSight, Hex, MongoDB, Pigment, Recorded Future, and Tableau.
I currently serve on the boards of Cyber Guru (cybersecurity training), Jiminny (conversation intelligence), and Scoro (work management).
I previously served on the boards of Alation (data intelligence), Aster Data (big data), Granular (agtech), Nuxeo (content services), Profisee (MDM), and SMA Technologies (workload automation).
I periodically speak to strategy and entrepreneurship classes at the Haas School of Business (UC Berkeley) and Hautes Études Commerciales de Paris (HEC).
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