Today I interview Anna Talerico about the business of SaaS and the systems that every SaaS company needs to have in place to accelerate growth.
Anna helps to build and scale technology companies. She is focused on go-to-market, people, culture, and creating significant enterprise value.
The importance of the 4Ps process in solving SaaS business problems
The four P’s are product, people, process and playbook. When a business is struggling with something, it is usually in one of those areas.
Where SaaS founders should start when building their organizational structure
Founders should spend most of their time talking about leadership, company vision and culture. You can never invest too much in leadership, culture or your people because it is the operating system you need to excel.
You can’t simply tell people how you are going to do something and just them to magically do it that way everyday if you are not reinforcing it. To embed something deeply into your culture, you have to talk about it every day until that thing is becomes a cornerstone of your culture.
When you are creating the right culture, where you are holding people accountable, it doesn’t feel like babysitting anymore but in the beginning it can feel that way.
Why you need to intentionally create an operating system for your technology startup
When you are growing a company especially in technology and SaaS, things often feel out of control, chaotic and disorganized. It often feels as if you are going from one problem to another.
It is important to have an operating system which basically defines how you run the business. It can define the meeting culture, you can have an how we work document, it can be written in there that you have to put in a PTO request when you go to the doctor, do you tell people when we are running out for lunch.
It can define how you plan, communicate and set goals, it doesn’t need to be a blown out thing, you can Google operating systems to find some nice examples you can adopt to suit your business. It helps to tame the chaos of running a business.
How to use OKRs effectively in your SaaS company
OKRs means objectives and key results, it is a way of setting goals and saying how you will measure it to know if you have achieved the goal. The objective is the goal and the key results are the measurements.
You can use it at the company level, department level, team level and sometimes individual level. It is a transparent process because it enables you to get visibility on what everybody is working on. You can set the company’s OKR and then every other level of OKRs is matching back to that, so it is a way of getting everybody focused and making sure that everyone is aligned in the same direction.
It also helps you to cut a lot of the busy work or extra work that people are doing because if you say I have this objective and these key results, then it is easy to cut off a lot of fluff that is not letting you achieve your objective.
Let us assume that your company has a revenue goal and the customer success team has an OKR to increase net revenue or gross retention to help the company achieve the goal.
It is important for leaders to improve communication, clarity and provide the appropriate context to the team. You can’t just assume that people understand OKRs, KPI, goals and how it impacts the business.
You can specifically tell them that it is necessary to improve net retention by two points so that when you do this the company will get closer to its goals that have been clearly defined.
The importance of documentation in the Product creation process
A prevalent trend in the startup world today is that the product often gets away from the team. When the product is growing and doing well there is often pressure to push out new features to stay competitive or fix bugs for an important customer that you just landed. This often leads to the product getting away from the people and the institutional knowledge is held in just a couple of people’s heads, how does thing work? how do we integrate with stripe? and this is a dangerous place for a company to be in.
It is important to have a lightweight documentation process from the day you open your doors and launch you product because if you have built that into your culture, it will never get away from you. You need to document and capture what is being released so that you won’t be regretting your negligence to put a process in place when you are at $3m ARR.
There are lots of good system such as JIRA, Notion or Confluence to help you with this process. Gitlab is a documentation first company and they provide great resources for learning how to adopt this process.
It is usually problematic to go to companies and find out that it is only the founder that knows about a particular piece of code that was used some years ago.
How to simplify your SaaS marketing processes with checklists
Modern marketing systems are fraught with so many things that are complicated or break easily. Even running webinars or some lead capture form can be complicated so it is important to have some lightweight documentation that outline the things you need to do when you are launching webinars or carrying out other marketing activities.
There is a book called Checklist Manifesto which is an essential read to help you in your marketing process.
It is very important to have as much attribution as you can, you want to know where your leads and business comes from, so that you don’t go for like six months without an idea of where your traffic is coming from which makes it hard to grow and scale your business.
The biggest thing with marketing is to have go to markets and some lightweight documentation to guide your activities.
How to create a scalable system for SaaS sales
The biggest thing about creating a scalable sales system is you need to know who to hire. You need to be clear on the kind of salesperson you need at your stage. You don’t need to hire somebody from Oracle for your startup because that is not someone who has worked at your stage before, it is important to hire someone who will add value to you at the current stage of your company.
When you begin to add more people into your sales team then you need to have your playbooks right, you need to define how you talk about your product, your customer process and your lead process.
It is important to know how to use CRMs such as Outreach or Salesloft to help you with messaging at scale to your prospects.
The basic metrics you need to know for your SaaS company
You need to know what your MRR, it is very essential. You need to know your revenue, expenses, cash flow and gross margin. You need to make sure you are using tools that are built purposely for SaaS companies because SaaS financials are unique. You need to know about your product usage, how many people are signing up for trials, what is the trial conversion rate and your customer retention.
Potential institutional investors will also look at you net and gross retention because it speaks to the health of the company and the strength of your product.
You also need to know your marketing metrics such as visitor leads and bookings. In your sales team, you need to know how many calls they are making? How many emails they are sending?
In each function of the business there are two or three core metrics you need to know and you don’t need to focus on any other metrics until you have really gotten those dialed in and you are tracking them accurately.
The biggest financial pitfalls SaaS founders need to avoid
The biggest financial pitfalls SaaS founders need to avoid are not knowing your billings and not billing your customers in a timely manner. You need to have billings tied in to when customers sign up, they need to get a bill and they need to pay it hopefully online which is better self-service.
Account receivable is very important, you need to monitor it and making sure that your customers are actually paying you and if they are not then you need to shut them off.
It is important to also understand deferred revenue as you start to scale. If you are usually get monthly payments but then you receive annual contracts, those annual contracts need to be allocated monthly, it should not be recorded as a lump sum.
You need to work with a bookkeeper or an accountant who is experienced in working with SaaS companies so that they are booking things correctly from the beginning.
How to segment your customers
It is very important to segment your customers because as you grow, you will have different segments of customers and there needs to be different customer success approaches for them.
If you have customers that are paying $100 a month, others that are paying $500 a month and others that are paying $1000 a month, you need to give them different time and attention.
You need to understand your customer, how they use your product and think deeply about your onboarding process.
What are the ten things you need to make sure that they are onboarded whether they are doing self-service or they are assisted by a customer success team. You need to know what success means to the customer.
You need to know the probability that someone is about to churn, or might be churning, decide what you are going to do about it and document it so that anybody in your company knows what to do if they find a red flag customer.
Some of the obvious red flags are they have not logged in X number of days and the number of days will differ based on how your product is used.
You need to know the high value features of your product that is unique and this are usually 2 or 3 things that are the real reasons your customers are using your product; you need to track your customer usage of these features and how they engage with it.
Resources
Arthur Ventures – Venture capital for founders Beyond Silicon Valley
Outreach – Sales engagement platform, Sales automation
SalesLoft – Sales Acceleration & Customer Engagement Platform
JIRA – Issue & Project Tracking Software
Notion – The all-in-one workspace for your notes, tasks, wikis
Gitlab – The first single application for the entire DevOps
Must Track SaaS Metrics to Grow Your Software Startup in 2020
SaaS Metrics That Really Matter For SaaS Business Growth in 2020
The Checklist Manifesto by Atul Gawande
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