So, for many of us in SaaS, these are still the best of times. The Cloud is bigger than ever, CIOs are buying more than ever, and SaaS is still on a roll.
But public stock prices are way down, and venture capital is much tighter than it was just a few months ago. So many of you will want to manage the burn more carefully.
But you can’t cut your way to growth. So what should a CEO do?
A few simple thoughts:
1. Let go of your bottom 10%-15% of sales reps, concentrate leads in the best reps. This always gives you both a top-line boost (the top reps close more per lead), and gives you room to hire more reps at the same budget.
Spot on as always. Maybe 1 exception – cut your bottom performing rep(s) and give their leads to better performers
— Sam Blond (@samdblond) May 19, 2022
2. Have a firm, management-team wide burn rate budget. And stick to it. Pick a fixed amount of cash you can burn each month, period. And make all your VPs accountable to it. They can negotiate themselves on where to spend incremental revenue and dollars. More here.
3. Move on from any VP that isn’t getting it done. They almost always overspend compared to the VPs that overperform. They hire mediocre folks on their team. And they overspend to try to make their plan. Dig deeper, and you’ll almost always find your top VPs are the most capital efficient (all-in) and your weak VP(s) spend a ton but have little to show for it. Founders often hide a bit from the huge direct and indirect costs from low-performing VPs. More here.
4. Spend more time with existing customers. And go save the ones on the fence. I know this is a broken record on SaaStr, but it works. Relatively speaking, the easiest sales are from your existing customers. So go spend more time with them. And go save the ones on the fence. Some of your churn you really can’t do anything about, but at least half the time, you can save the customer if you just show up or show up more often. That will often lead to a renew that’s on the bubble.
5. Build an L4M Model, and update it every month. An L4M speaks with data, and it projects your revenue and burn rate more accurately than a “wish and a hope” model. You can’t plan your burn if you can’t model it. More on that here.
6. Get better at collections. Make sure you are collecting 100% of your MRR each month, ideally 110% if you do annual deals. Too many startups are better at closing deals than collecting the cash. More here.
7. Push a tiny bit for 2 years of cash on annual deals. This doesn’t always work, but at the margin, offer a bigger discount for 2-3 years of cash on bigger deals. Later, this can sting you, as you are trading off more ARR for a tiny bit more cash. But in leaner times, it can be a good deal on a few of your larger deals.
8. Get the renewals out early, and work harder on them. Related to collections above, but too many startups make renewals too hard and wait too long for renewals checks. No matter what the contract says, get the renewal invoice out at least 60 days prior to expiration and ask for payment no later than the contract end date. Getting all your renewals paid on time can pull your cash forward 20% or more.
9. Make sure your sales comp plan rewards the high performers. Too many times, a sales comp plan is too flat, and pays out too equally. Change that. Make sure your top performers make a lot of money, and have accelerators. This is more capital efficient for you, too.
10. Get on the road. Go visit customers, and prospects. Show up to your bigger deals in person much more often. Be at all the top events in your industry — because your customers will be. This always gives your revenue a boost, at very little additional cost beyond a lot of time and a few airline tickets and hotel rooms.
Applying the above can often extend your cash runway 20%-30% right there. Without making any other real changes, and without impacting growth at all.
Because you still gotta grow.
Cutback on sales, miss the plan for the year
Cutback on marketing, miss the plan for next year
— Jason ✨BeKind✨ Lemkin #ДобісаПутіна (@jasonlk) May 27, 2022