The State of SaaS in 2018
The global community of SaaS entrepeneurs, execs and investors met in San Francisco last week at SaaStr 2018. Jason Lemkin’s 3 day festival of knowledge and networking was bigger than ever this year which reflects the state of SaaS in 2018. Here are my top 10 takeaways from an inspirational week.
Whilst there were great insights and lessons on a macro level from the likes of Stuart Butterfield (Slack), Phil Fernadez (Marketo), Michael Prior (Trello) Mike Cannon Brookes (Atlassian) and Darmesh Shah (Hubspot) it is the actionable and practical advice which is in abundance at SaaStr that I value most.
This year my actionable takeaways and inspiration came from the likes of David Skok (Matrix Partners), Karen Peacock & Des Traynor (Intercom), Lars Nilsson (Cloudera), Evan Liang (Lean Data), Joe Chernov (Insight Squared) and Heidi Bullock from Engagio.
Here’s some of the issues that these SaaS thought leaders inspired me with.
1. Hiring is the # 1 Cause of Failure
The number one cause of failure for most SaaS companies to meet their goals is the inability to hire sales headcount on time.
In order to meet the next investor milestone or fundraising threshold you need to ensure you have your sales headcount recruitment as your number one priority.
However, you need to ensure you have product market fit. Once this is achieved you need to ensure you hire on time, failure to do so will be costly.
2. It’s All About Net New ARR
How can we best illustrate growth to investors is always at the front of every SaaS entrepreneurs mind. More often than not it has been in the form of slides on our bookings, quarter on quarter.
Also over the years we have been paranoid about the state of our MRR, ARR, CAC and CLTV and can produce beautiful slides to illustrate our success. Although all these metrics are still vital to track perhaps the most important metric to show your investors is the development of you Net New ARR. But what is this?
Net New ARR =
New ARR (new cust) + Expansion ARR (increase in existing cust) – Churned ARR
Measure this on a monthly and quarterly basis and you will be able to demonstrate your success. If you want to read more about Net New ARR have a look at David Skoks excellent SaaStr 2018 presentation, always the highlight of the show for me.
And of course ensure you are always measuring and improving your productivity per rep whilst minimising churn. That’s your key to net new ARR growth.
3. Separate Your Inbound & Outbound Machines
All of us worry about creating an effective, scalable and repeatable sales organisation. One of the key ingredients in this is separating them into inbound and outbound units.
Your inbound sales organisation will focus on working all the leads coming from marketing in the form of MQLs. The key success factor for the sales development rep (SDR) that sits here is speed to lead.
The outbound organisation will be filled with account development reps (ADRs). The key success factor for these folks will be the ability to seek and connect with specific accounts and job titles within a certain target market.
Activity KPIs will vary from company to company but an average of the responses I got from various companies at SaaStr was 75 dials per day plus 40 emails put into automated email sequencing tools like SalesLoft, Zenprospect with data primarily coming from Linkedin Sales Navigator and Zoom Info.
4. Focus on Value & Product Engagement
“The more we focus on revenue due to investor or owner pressure the worse we will be.” These were the wise words of Karen Peacock, an Intuit veteran and new COO of the SaaS rising star Intercom. Instead we should focus on delivering value as early as possible and closely monitor product engagement.
Value is all about the true benefit you are giving your customers and engagement is all about the exact usage of your product. Product usage data is now the most sought after information from investors sometime more so than you SaaS financials.
One of the best vendors in the exhibit hall this year were the folks at Pendo. I heard multiple stories from speakers and attendees alike about how they were now making much smarter product roadmap decisions thanks to the data that Pendo now give them.
Plus their CEO Todd Olson seemed like a great guy and unlike many CEOs could still give an awesome demo.
5. Product is Your Sales Person
Many SaaS products especially focused on either the enterprise or even mid market buyers have relied on expensive sales teams.
However a new breed of SaaS is emerging which really uses the product as it’s sales person.
The key here is to know exactly what the WoW moment in your product is and deliver it early in the user journey.
Remove as much friction as possible, sometimes with things like sample data or content that may be difficult for the user to produce and try to remove stages of any flow.
Concentrate on the time the customer first comes to you and make your onboarding amazing. And realise that you need to re-onboard customers all the time, especially if they have not used your product in a while.
6. Build What you Sell & Sell What you Build
This seems simple but it’s spot on. This bit of genius came from Des Traynor, the co-founder of Intercom.
Too often than not I have seen development teams building features in products just because its a fun project to do. That maybe so but that doesn’t mean that will help you sell the product or indeed is what the market demands.
On the other side I have seen sales and marketing teams sell well beyond the capabilities of their current product. This may well get you a new customer and a commission check but in the end it will lead to disappointment.
So build what you sell and sell what you build.
7.The Modern B2B Marketing Funnel
In the old days the marketing funnel was seen to sit on top of the sales funnel delivering leads to a sales organisation that would then close those leads. Today it is very different with the two funnels living side by side.
On average, according to HBR a sale happens between the 5th and 12th contact and today there are 5.4 people involved in every sale.
A SaaS marketing organisation should aim to develop purchase intent at every stage and with every program whether that be an email, event, PPC or piece of digital content.
Getting people to opt in, in order to be reached out to should be a priority. “Do you want to talk to sales” should be used often to find those quality MQLs.
8. Do Your Leads Match your TAM?
This is a great one for all those marketing teams out there who are chasing MQL targets. You may be over achieving them but how many of these leads all fall into the category of your ideal buyer persona or your total of target addressable market (TAM).
Separate your leads according to the buyer persona’s you use. The easiest way to do this is by job title and or company size.
Allocate both time, budget and focus to specific job titles and separate those leads. Those that do fall within your TAM happily send over to your SDRs to work but those that do not fall within your TAM send down another nurturing track until they have proved they are worthy of a colleagues time and attention.
9. Avoid the Post Sale Anticlimax
So often the experience for a buyer directly after the signing of the agreement for a piece of software is a let down.
After months or even years of hunting by marketing and sales teams the deed is done. This is where customer success should kick in but more often than not all that the customer gets is a time a few weeks from now when there is a training webinar.
Instead of falling into this trap, see this time as a huge opportunity. In the minutes and hours after a customer signs your contract treat them like royalty.
Invite them to your community or blog, invite to an event or thought leadership experience with a member of your leadership team. Whatever you do make sure you do not let them down.
10. Your Story needs a Problem, Insight and a Promised Land
Jason took us through the storyline of Finding Nemo and Peter related to how that storytelling technique could be used to market and sell SaaS.
It’s no secret that every story needs a beginning, a middle and an end but what is even more important is a problem, the insight you can give and the promised land that your product or service can provide.
Whether it be a website, promotional video or sales presentation you need to ensure you have highlighted the pain of the problem you are attempting to solve. Once you have done that you must bring some insight to the table in terms of what you product can do. And finally you must effectively describe the promised land that all your customers reach once they have used your product.
So that was it for SaaStr 2018. With over 40 hours of content I could not cover everything but I hope those that managed to inspire me can in turn inspire you. Could luck with developing your SaaS businesses.