How a Deep Dive from an Outside Expert can Change the Outcome at Your SaaS Business
CEOs at fast-growing SaaS companies can’t be all-knowing, and the executives immediately below him/her have blind spots, skill/experience gaps and motivations of their own that can impact the CEO’s view from the top. If you’re managing fast growth, or need to implement change to accelerate growth, bringing an outside expert in to assess your business can be one of the highest ROI and ROTI (return on time investment*) activities available.
Our business is focused on helping SaaS firms accelerate growth, and our experience working with leadership over the years created a unique opportunity to see patterns that impact effectiveness. Below are two examples of recent work and outcomes from deep dives on client company operations through a business effectiveness assessment.
Pricing strategy and discipline can make a significant difference in revenue and profits. And it’s amazing how common it is for small- to mid-sized SaaS companies to have pricing that’s unstructured, situational or subject to the discretion of a sales representative. And this causes SaaS companies to leave a lot of money on the table.
A SaaS company in the fintech space we worked with has a solution made up of 18 modules. Clients were able to buy any number of modules including one; there was no packaging nor minimum. In addition, the CEO was pricing each deal based not only on objective factors, but his gut feel for what the market would bear. Not only did this lead to below-market pricing for the software as clients could cherry-pick functionality, but the time to respond to pricing requests was as much as a week, creating unnecessary friction in the sales process.
ALG created a multi-module packaging strategy that more than doubled the average unit of sale, and a pricing spreadsheet that formalized the CEO’s rubric for pricing. The spreadsheet enabled the sales manager to price deals in minutes. And this was accomplished without the deeper work required to optimize pricing (research, cross-functional committee to align on price). The folks at Price Intelligently offer a wealth of resource on pricing, including this great article as a start. There also are a number of SaaS pricing consultants to turn to if you can budget for this initiative (contact us for a referral).
MRR churn is one of the KPIs that SaaS CEOs need to monitor like a hawk, and many do. But the root causes of churn are not always clear. And with the lean staffs at more mature companies under $20 million in revenue, it’s tempting to keep staffing low even as the customer is telling you that something’s wrong. (If everything was hunky-dory, they wouldn’t churn, would they?)
For an information publisher, our deep dive included evaluating causes of churn and possible actions they could take to mitigate it. It turned out that there was a lot that could be improved. There was no on boarding or customer success process other than a training by the sales rep after the contract was signed. The next time a customer would hear from this company was on renewal (an annual process).
After presenting our findings to management, they’ve created a two-person customer success team, built a content, training and contact journey for the full lifecycle (different for year 1 and year 2+), and improved retention and customer satisfaction measures. Automation, including a customer-success information system, and surveys during the journey are all contributing to lower churn and accelerating revenues even as new sales revenue grows slower than overall growth at the firm.
Churn can come from issues beyond customer success (as Anna Talerico aptly states, it’s everyone’s problem). For products that have been in the field for some time, you may find that you need to improve to remain competitive with alternatives in the market. Sometimes this is feature decay vs competitors, sometimes it’s user interface, and it can also be a pricing and packaging deficiency. New players in a SaaS market also can just make life difficult with their go-to-market strategies… VC funded SaaS firms often play a “growth at any cost” game, while more established players have investors seeking growth at a reasonable price. This last instance can compel CEOs to revisit business plans to better reflect reality, which can also cause a healthy reinvigoration of the enterprise.
Even more pernicious than the loss of revenue that’s right in front of you is the loss of future up-sells that each lost customer represents. And having pricing and packaging discipline is also key to that future revenue.
If you or your investors believe that you’re leaving money on the table, our SaaS360™ Business Effectiveness Assessment and Report™ could be a perfect step to take. For CEOs positioning their firms for a future liquidity event, the SaaS360 can highlight changes needed to achieve a higher valuation. SaaS360 is designed for leadership teams and investors to assess the performance and potential of SaaS companies that range from about $6 to $30 million in revenue.
The SaaS360 BEAR™ is a deep dive across the major functions of the business including:
Marketing, product management, pricing and lead generation
Sales organization and sales process
Management reporting and KPIs
Distribution and partnerships
Organizational effectiveness and staffing
The SaaS360 BEAR enables management to confirm what’s working and quickly course-correct as needed with detailed observations, benchmarks, actionable advice and reference resources. The SaaS36 BEAR takes 8-12 weeks to complete.
Want to discuss more about how your organization can be more effective? Schedule a call with us to discuss the SaaS360 BEAR in detail and explore if it’s right for you.
*Return on Time Invested is a sorely under-appreciated metric that is unfortunately hard to measure (pundits talk about time to measure this being relatively high). But unlike many metrics, you can trust your gut on this one. Is that four hours a month in THAT meeting really paying you back? Can you get a meeting summary or read the notes from the scribe? I tip my hat to a client, Chris Vignone of PM Business Advisors, for making me aware of this way of thinking about utilizing time in his 60- to 80-hour work weeks.